Ciena’s Suppliers Quit, Reorg Will Temporarily Mask Any Fallout
Component shortage announced ahead of a major corporate reorganization that have netted major tech firms billions of dollars.
June 21, 2021
In a twist to the current semiconductor shortage, Ciena (CIEN), a networking hardware, software and services company, revealed in its latest 10-Q that certain of its semiconductor component suppliers are throwing in the towel:

“In addition, some of our suppliers have indicated that as a result of this shortage they intend to cease manufacturing of certain components used in our products.”

In response, Ciena is loading up on scarce inventory, looking for new suppliers, and even considering engineering design changes. The announcement comes just weeks before Ciena will unveil a major legal entity reorganization that will likely make its near term accounting results look much better than its economic earnings:

“We expect to adopt the plan in the third quarter of fiscal 2021. This reorganization could have a material effect on our financial position and operating results, including a significant one-time tax benefit associated with the recognition of a net deferred tax asset and potential reversal of a portion of the valuation allowance.”

Expect Ciena to announce it’s transferring IP assets to a lower tax jurisdiction like Ireland. We’ve issued several alerts detailing how technology companies move some of their most valuable assets to create billions of dollars in DTAs that may be used to inflate reported earnings for years to come.

Expect the one time benefit in Ciena’s third quarter to help mask any component shortfalls that result in lower than expected sales. The reorganization will also buy Ciena an extra ninety days to source new suppliers or alter product designs.
Related: CSCO, JNPR, RBBN, INFN, DOX, ADVOF, MRVL, NOK
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