be sure, it has competition: Startups can win some business, and the smartly run Sycamore Systems stands to be a threat. But Ciena execs say they have distinct advantages that will help them win in the long-term. One is the company's size: Ciena is big enough to assure its customers and quash new competition, but is still small enough to be an underdog to Nortel.
More important is Ciena's product suite. While most of today's network activity is manual - creating a headache for customers when something needs fixing or changing - Ciena's products automate networks and allow them to talk to each other. It's a cutting-edge ability that all telecom companies will eventually want, Ciena says. But much of Nortel's and Lucent's current business comes from older network solutions, a fact that may be responsible for the two companies' recently slowing business. As spending shifts toward next-generation products, Nettles says, Ciena will benefit.
"There is a need for networking intelligence," he says. "To deploy bandwidth in minutes, not months; to manage with computers, not people. There are hundreds of people in large carriers who have to grow through enormous, large processes. We are building equipment that allows them to do that." Helping clients build and scale these massive networks, he says, is something Ciena has done in a responsive and cost-efficient manner.
Nettles says the biggest challenge for Ciena in the coming year is to reassure a nervous market, a task he hopes to accomplish by simply delivering on the product and service front. So far, the financial signs are good: Ciena expects revenue growth in 2001 of 75 percent to 85 percent. Concern rightfully exists over the company's stock price, which trades at a lofty price-earnings ratio of 105. (A price-earnings ratio is the most common measure of how expensive a stock is. It's equal to a stock's capitalization divided by its after-tax earnings over a 12-month period.) But execs simply point to the large opportunity before them, saying they hope an increase in business will justify the company's valuation.
Indeed, while some claim that the optics sector is due for a shakeout, there seems to be more evidence of potential growth than there is of a complete collapse. "The extreme is calling it the dot-com sector," says R. Scott Raynovich, executive editor of LightReading.com, a Web site for news on the optical-networking industry. "But this is still a technology market, not a media and retail market. This is real innovative technology."
