Lucent Technologies (LU) 56 9/16 +13/16: The news was broken by Reuters after the close on
Friday, but today will be the first opportunity for traders to respond to reports that Lucent is in
talks to buy Chromatis Networks, a closely held optical networking company, for roughly $5.5
billion in stock. That's a healthy price tag to be sure, but that big-dollar offer speaks to the value
placed on an optical networking company with leading edge technology, or more specifically, the
value placed on a company whose technology can fill a gap in Lucent's otherwise strong product
offering and further its end-to-end product line-up capability. What makes Chromatis so appealing
is that it makes optical equipment that routes voice, video, and data traffic along fiber optic
networks in metropolitan areas-- a technology that would strengthen what is considered to be a
weak spot in Lucent's product mix, but more importantly, a technology that would help strengthen
Lucent's competitive position against rivals such as Nortel Networks (NT) and Cisco Systems
(CSCO). It would be remiss not to point out that the former company, along with Sycamore
Networks (SCMR), has also been cited as a prospective acquirer of Chromatis. In fact, The Wall
Street Journal, citing industry executives, reported that Chromatis at one point was weighing
offers from both Lucent and Sycamore. Perhaps then a bidding war for Chromatis has already
taken place behind the scenes which is why Lucent seems willing to pay such a big price at this
time for a company whose product won't be commercially available until this summer. Whatever
the case, this news simply underscores the hot demand for optical networking equipment that still
exists as those experiencing it firsthand are still willing to pay handsomely for a competitive edge.--
Patrick J. O'Hare, Briefing.com
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Again there is an emphasis on optical stocks. JDSU at $84 is cheap when a run to $96 will occur.
Jack |
