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Does Ciena Have a Chance?

Tickers in this article: CIEN CSCO JNPR
NEW YORK ( TheStreet) -- One of the pitfalls of financial writing is the constant need to want to be right.

Once in a while, though, it pays to listen to that little voice in your head telling you to be careful and not get ahead of yourself, particularly when there's a stock that you want so desperately to like.

Telecommunications equipment maker Ciena (CIEN) serves as the perfect example. In August when it appeared the stock was poised to take off at $18.38, I opted to wait for a better entry point. It turned out I was right.

Today, with the stock sitting at $15 following a subpar fourth-quarter earnings performance, I'm back at this same predicament -- trying to time the perfect buy. Am I pressing my luck?

For the period ending in October, Ciena reported non-GAAP loss of 7 cents per share on revenue of $465.5 million. The company missed on both the top and bottom lines as Street estimates called for a loss of 6 cents on revenues of $468.3 million. Revenue dropped by 1.8% sequentially. On the other hand, that it was up 2% year-over-year was encouraging.

On a GAAP basis, the company lost $38.8 million, or 39 cents per share. Profitability continues to be a challenge however. Adjusted gross margin was 42.7% -- worse than the 43.2% logged a year ago. But it was 3% better than the third quarter.

In terms of guidance, management expects first-quarter revenue to arrive in the range of $435 to $460 million, which is in line with Street estimates of $458.6 million. These projections are certainly not great. But on a relative basis, they are pretty consistent with the guidance provided by rivals Cisco (CSCO) and Juniper (JNPR) .

However, these names are much bigger, profitable and more agile. Also both Cisco and Juniper have shown an ability to maneuver and adjust more easily. This is despite intense competition and weaker demand. Still, Ciena's overall results were far from a disaster. And the company did show some meaning sequential improvements.

For instance, margins did pretty well, considerint they have come under increased competitive pressure. It seems that management understands the challenges that Ciena faces and seems to be making some good decisions. But I just don't believe its sustainable -- at least not in the long term.

Nonetheless, Gary Smith, Ciena's CEO had this to say about the peroformance:

"With 5% annual revenue growth and fourth-quarter financial performance in line with our expectations, we continued to significantly outpace the market and take share in 2012 despite the challenging environment. That momentum resulted in record order flow and year-end backlog. Customers require more network convergence with greater programmability to deliver more services, and we believe our portfolio is leading the transformation to next-generation intelligent networks."

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