When optical networking expert Ciena Corporation (NASDAQ:CIEN) reported earnings on Thursday morning, it sparked a wholesale revival across the industry.
Sales improved 6% year over year to $508 million, yielding a $0.02 net profit per share. Analysts were looking for $484 million and a $0.01 loss per share, and management raised next-quarter revenue guidance well above Wall Street's targets.
Ciena Corporation (NASDAQ:CIEN)'s own shares jumped more than 17% on Thursday, setting fresh 52-week highs. But this victory parade wasn't Ciena's personal party. Investors took the strong report as a sign of renewed spending on high-speed networking infrastructure, and the rising tide lifted lots of boats.
Close competitor NeoPhotonics Corp (NYSE:NPTN) soared 15% higher. Larger rival JDS Uniphase Corp (NASDAQ:JDSU) jumped 7.9% to become the fastest gainer on the S&P 500. If Ciena Corporation (NASDAQ:CIEN) can beat its own expectations in selling Internet backbone equipment to a bevy of major telecoms, its chief rivals must eventually follow suit. JDS Uniphase Corp (NASDAQ:JDSU) is only one month removed from its latest quarterly report, which sent shares diving 7% overnight (but all was forgiven a week later). NeoPhotonics Corp (NYSE:NPTN) also reported in early May, but didn't make any waves then.
Watching Ciena Corporation (NASDAQ:CIEN) come on strong only four weeks later tells us one of two things: Either Ciena is killing its rivals in the marketplace, or the sluggish networking sector is finally due for a big order bounce.
Ciena Corporation (NASDAQ:CIEN) CEO Gary Smith certainly gave investors reason to believe in the latter. "Basically, the architectural changes taking place in the network today are all driven essentially by the end user," he said on Thursday's analyst call. "For example, networks are now being affected by tremendous growth in cloud computing, mobility and machine-to-machine applications, profound and highly disruptive movements that are only just beginning."
Smith also expected the company to grow faster than the market, but it's pretty much his job to present Ciena as a market leader. There's no doubt in my mind that the global networking market is overdue for a spending boost, especially in the light of high-speed mobile connections going mainstream everywhere. Ciena Corporation (NASDAQ:CIEN) taps into that trend, but needs to watch out for rivals like JDS Uniphase Corp (NASDAQ:JDSU) and NeoPhotonics Corp (NYSE:NPTN) along the way. All things considered, I think the market reaction this week was just about correct across the optical sector.
The article Have You Seen Ciena's Good News? originally appeared on Fool.com and is written by Anders Bylund.
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