CORRECTED-Ciena stock rises amid deal speculation
In New York item headlined "Ciena <CIEN.O> rises amid renewed deal speculation" please read paragraph two as "Also, an indication that Ciena had increased purchases from one maker of components used in its equipment was also 'injecting some optimism' into the stock" instead of "...at least one company was buying more of Ciena's equipment..." (corrects to show Ciena was the party doing the buying).
A corrected version follows.
NEW YORK, Oct 29 (Reuters) - Shares of Ciena Corp. jumped as much as 35 percent Thursday, amid renewed hope that the battered maker of equipment that boosts the capacity of telephone networks was once again a possible takeover target, traders said.
Also, an indication that Ciena had increased purchases from one maker of components used in its equipment was "injecting some optimism" into the stock, one analyst said. (corrects to show Ciena was party doing the buying)
Ciena shares, far and away the most active on Nasdaq, closed up 3-3/16 at 15-7/16. They had reached as high as 16-1/2 earlier. More than 31 million shares changed hands during the day.
Several arbitrage traders, who deal in takeover stocks and who declined to be identified, said the movement was based largely on speculation that Ciena was again an attractive takeover target.
About six weeks ago, Ciena was dumped at the altar by rival telecom equipment maker Tellabs Inc. <TLAB.O> after a string of bad news about Ciena's business outlook clobbered both companies' shares. Their $4.7 billion planned merger, a transaction originally valued as high as $7.1 billion, was officially called off Sept. 14.
Speculation about a second attempt at a deal between the two surfaced last week after a newspaper account suggesting that Tellabs remained interested in Ciena for its technology. Ciena's wavelength division multiplexers, or WDMs, divide lightwaves in fiber optic cables, thus boosting a network's traffic capacity without having to add new lines.
William Magill, telecommunications equipment analyst at NationsBanc Montgomery Securities, said Thursday's surge was also related to word that Ciena had boosted purchases from one of its key suppliers, Uniphase Corp. <UNPH.O>, which could indicate Linthicum, Md.-based Ciena's battered business outlook was improving.
"That has put some optimism back in the stock that has been absent for some time," Magill said.
A key factor in the collapse of both the Tellabs deal and Ciena's stock price recently was a series of lost business opportunities. Ciena lost out on opportunities to sell equipment to AT&T Corp. <T.N> and another competitor muscled in on a long-term relationship it had had with another customer.
As for the takeover speculation, Magill said such rumors would continue to affect the stock in coming months because Ciena's technology has broad appeal to other equipment makers. "Those rumors are always out there and will continue to be," he said.
But, Magill said, given its dramatically lower stock price -- it had traded into the low 90s in July -- he believes "Ciena would be reluctant to sell at the current valuation."
"I think you would see a pretty big disconnect at the moment between buyer and seller over a fair market value of the company," Magill said.
17:20 10-29-98
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