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JP Morgan Lowers Ciena to Underweight

JP Morgan downgraded Ciena (CIEN) to underweight from neutral.

Analyst Ehud Gelblum says the negative preannouncement is Ciena's second in the last three quarters. He notes the $75 million in revenue is 22% below his $95.8 million estimate, well below the implied guidance of "up to 30%." He says the 7-cent to 8-cent third-quarter loss is in line with guidance.

Gelblum says Ciena's core business -- optical-networking manufacturing -- has apparently fallen off considerably. He widened the 29-cent fiscal 2004 (Oct) loss estimate to a 31-cent loss. While he believes a move away from the core optical business is strategically correct, he doesn't think current a revenue opportunity is diverse enough to support the operating model with a quarterly revenue breakeven level of about $185 million.

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