Ciena lost money, missed expectations in Q2

Going from a profit to a loss in a year's time isn't a cool thing, but it's only to be expected. Think about Ciena's business model, and then think about the recession. As this news source points out, customers are cutting back. Ciena will need to bide its time until things get better. Management must work as efficiently as possible to keep costs down and keep the losses to a minimum. According to commentary within the company's press release, the third quarter looks like it might turn out to be a better time for the business.

Maybe that will happen, but I have to say, the current numbers are rather unattractive to me. Take a look at the cash-flow statement. That's one heck of a drop for net cash from operations. And the quarterly earnings trend does not make a great case for the bulls out there, in my opinion.

However, Joseph Lazzaro makes an interesting argument for bullish sentiment in this case. He points out that now may be the time to buy and wait for broadband demand to eventually grow. He correctly states that demand for high-bandwidth technologies can only increase over time. He also took a look at analyst estimates and concluded that the forward-looking trend might be a positive element to the Ciena story.

My colleague's thesis is sound, but I do think that the data just reported don't inspire confidence. And I'll point out what he also took pains to highlight: Ciena is, no matter what, a risky holding. You might make money with it; then again, you might be buying a lottery ticket, nothing more, nothing less.

I'll pass on Ciena and wait for more data in the months ahead. I'll remain bearish on this name, even though the stock has bounced back very nicely from its 52-week low. That was a significant miss on the bottom line. Ciena has its work cut out for it, certainly...

Disclosure: I don't own any company mentioned; positions can change without notice.