Ciena Corporation Q4 Conference Call Nuggets: Competition and Thai Flooding
Competition and Pricing
Eric Ghernati – Bank of America-Merrill Lynch asked: You talked about how your value-add proposition with large carriers is improving. Are you worried that some of your competition right now could get even more aggressive on pricing and lead to an even more aggressive pricing environments for you with the customers, especially as some are expected to come after the 100 gigabits market from 40 in North America?
Gary B. Smith – President, CEO and Director responded: I think what we’re seeing is certainly from some of the legacy generalists, but that sort of environment has been around for a while.
It’s challenging from a pricing point of view, but it has been for a long time. I don’t see any particular change to that.
I think because we’re much more of a focused specialist player because of our leadership on the technology space and the solutions we’re able to bring to market. I think we’re very confident that we’ve got a very robust value proposition that is very valued by these key customers.
I think if you look at the roadmap of evolution for over the next 12 months as well, I think we’re going to continue to evolve our technology lead and leverage our fair relationships during 2012. So, I describe a tough environment but it has been for a while.
I think we’re very focused on the value propositions and the relationships that we have with the major carriers.
Blair King – Avondale Partners asked: Regarding the Thai flooding, what is your sense regarding the current vendor relationships that you have relative to meeting market demand? I know you mentioned $10 million could be impacted. Could you add some color around that $10 million being reflected in our guidance?
Also as you’ve started to qualify alternative vendors, would the assumption be that maybe some of your current vendors may not be able to meet demand? What’s the current thought process?
James E. Moylan, Jr. – SVP, Finance and CFO responded: Generally speaking, the Thailand flooding had some meaningful impact on the supply chain worldwide.
We had done some planning prior to that flooding in enterprise risk management sense. We had built up some spare inventory and that’s helping us this quarter, but as we saw the extent of the flooding and the effect on suppliers, we undertook a whole range of activities.
This has included working through and making sure that we had as much excess inventory to bridge the gap until the suppliers could get back online, including qualifying secondary sources and going to other plants on the part of some of those suppliers.
We’ve undertaken a wide range of activity.
Our supply chain people have worked very hard and I think they’ve done a very good job in mitigating what originally looked to be for us, now we’ve got it down to less than $10 million.
Now, I think it’s possible; it could be significantly less than $10 million. We did in terms of our guidance tried to take into account that there could be an effect on Q1.