Ciena Out of S&P 500 - Analyst Blog

According to Standard and Poor’s latest realignment, Ciena Corp. (CIEN), the telecommunications equipment maker has been removed from the S&P 500 index and has been included in the S&P MidCap 400, replacing Blyth Inc. (BTH). Visa (V) will replace Ciena in the S&P 500 Index.

After the announcement, Ciena shares fell 6.64%, as negative investor sentiments loomed on the stock. The S&P 500 Index includes companies with market capital of above $5 billion. Since Ciena has a market cap of $1 billion, it is no longer a representative of the market index and thus has been removed.

Standard & Poor's added five other companies to its S&P 500, including Mead Johnson Nutrition Co. (MJN), which is being split off from Bristol-Myers Squibb Co. (BMY), Ross Stores Inc. (ROST), Cliffs Natural Resources Inc. (CLF) and SAIC Inc. (SAI). S&P said the companies moving to the index all have market capitalizations above $5 billion, making them more representative of the market cap range.

MBIA Inc. (MBI), Dynegy Inc. (DYN), KB Home Inc. (KBH) and Convergys Corp. (CVG) are being dropped from the S&P 500, as well. Theses shuffles are expected to take place as of Dec 18.

Ciena provides communications networking equipment, software and services. Recently, Ciena acquired Nortel Network Corp’s (NT) optical networking and carrier Ethernet businesses for a total consideration of $769 million. Ciena expects the deal to be significantly accretive to its operations in fiscal 2011. The transaction is expected to close in the first calendar quarter of 2010.

Following the acquisition, Standard & Poor’s lowered its credit rating on Ciena from B+ to B (financial situation varies noticeably). Ciena exited the fourth quarter with $917 million in cash and short-term investments and also had another $798.0 million in long term debt (convertible notes payable). The deal also put Ciena into a net debt (debt exceeding cash) position.

Ciena’s results for the current quarter beat the Zacks Consensus Estimates. The company posted better-than-expected results amid cautious consumer spending and weak demand. The more stable macro-economic environment helped the company deliver sequential growth.

However, the loss widened in the quarter as expenses grew, which more than offset revenues. Although we do not expect Ciena to generate profit in the next two quarters, we do expect a recovery in 2010 due to favorable operational execution and growth in data traffic.
Read the full analyst report on "CIEN"
Read the full analyst report on "BTH"
Read the full analyst report on "V"
Read the full analyst report on "MJN"
Read the full analyst report on "BMY"
Read the full analyst report on "ROST"
Read the full analyst report on "CLF"
Read the full analyst report on "SAI"
Read the full analyst report on "MBI"
Read the full analyst report on "DNY"
Read the full analyst report on "KBH"
Read the full analyst report on "CBG"
Read the full analyst report on "NT"
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