Ciena Corporation (NYSE:CIEN) Q3 2019 Earnings Conference Call Transcript

Sep 05, 2019 • 08:30 am ET

Previous

Ciena Corporation (NYSE:CIEN) Q3 2019 Earnings Conference Call Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

[Operator Instructions] Your first question comes from George Notter with Jefferies. Please go ahead.

Analyst
George Notter

Hi, guys thanks very much, and congratulations on these terrific results. I guess, I wanted to start out Jim, maybe asking a question about gross margins. If I go back, you thought of the company is 42% to 43% gross margin business over the short and intermediate term as you guys were taking footprint and the obviously the gross margin result was much better here 44.7%. I think you guys had a positive surprise last quarter as well of course, but it seems you guys are still adding footprint. So what do you think about gross margins now, is this sort of the new norm for you guys even in a mode where you're taking footprint, and tell us what's going on in the margin side? Thanks.

Executive
James E. Moylan, Jr.

As we've always said George that there are a lot of variables that impact our gross margin, new deals sometimes will give credits to customers for big new deals and sometimes those hit our results and sometimes they don't. And so that's something that it's hard to call exactly when they're going to hit. As a result of those kinds of variables, we have shown some volatility in our gross margins has moved from 41% to 44.7% over the past six quarters.

I believe that right now we're in a 42% to 43% range. We certainly haven't given up on getting into the mid-40s. I don't know exactly when that's going to be. I don't think it's going to be next year, but I would say that we're going to post significant profitability this year and next year really at this range of gross margins.

Analyst
George Notter

Got it. And then just as a follow up, I guess, I also wanted to ask about customer attitudes, you guys have talked about taking market share, but I'm curious about customer attitudes around Huawei. Historically, they've been ever present. I think in the international side of your business, and I think historically they've been pretty disruptive on industry profitability, but do you see things changing there, are they getting invited to RFPS, do you see them competing with you on new business or is that changing given you know the security issues that are out there?

Executive
Gary B. Smith

George, this is Gary. I think it depends very much on what region you're talking about and what country. I do think over the last couple of years you're seeing sort of a potential rebalancing of spend in the face of sort of overdependence on them. They've taken such a large market share. In telecom infrastructure generally, I think just from a market point of view, I think the rebalancing of that I think you're seeing now. It's really difficult to discern the impact on our business to date I would say no substantive impact to date. But we are in the infrastructure business, and that takes time for decisions to roll through in terms of revenues. I