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To: BWAC who wrote (38590)	2/20/2002 1:50:21 PM
From: E.J. Neitz Jr	Read Replies (2) of 53068

Buying CIEN now. CSFB Report.Thanks for info on this one! CIENA CORP. (CIEN: $8.73) 02/19/02 CIENA to Merge with ONI; Bolsters Strategic Position Annual EPS Prev. EPS 10/03E -0.30 10/02E -0.61 10/01A 0.60 Rating: BUY 12-Mo. Target: $19 On 2/18/02, CIEN announced its intent to merge with ONIS in a transaction valued at approx $900M; Each outstanding share of ONIS will be exchanged for 0.7104 CIEN shares representing 24% ownership of the combined company; The transaction is expected to close in either calendar Q2 or Q3 of 2002. Project the transaction is likely to be neutral to our F2002 EPS estimate for CIENA and potentially accretive in F2003; Assuming the $55M-$65M in annualized expense synergies indicated by mgmt would imply $0.05 in EPS accretion for CIENA during F2003; In addition, we believe the transaction could prove even more accretive given our view that significant rev synergies exist. Merger with ONIS vaults the combined company to #1 in metro DWDM transport with a pro forma market share of 48.4% for Q3:01 (according to Dell'Oro Group); Substantial opportunities exist to sell ONIS ONLINE product portfolio into CIEN customer base; More importantly, CIEN now boasts best-in-class position in metro transport technology that can be integrated with CIEN switching portfolio (CoreDirector/MetroDirector K2) to further extend competitive advantage. Characterize integration risk as low; It is likely ONI's optical switching product development efforts (no revenue contribution to date) will be collapsed into CIENA's switching business or discontinued while CIEN's metro DWDM transport business (est. 12% of CIEN FQ1:02 sales) will be de-emphasized obviously in favor of ONI's core business; Projected annual expense synergies of $55-$65M appear reasonable. Merger is a clear positive for CIENA further enhancing the co's strategic position in next-gen optical networking; Rate shares BUY reflecting CIENA's ability to gain significant market share in the next cycle; CIEN shares are trading at 2.9x and 1.8x firm/value to sales based off our FY02 and FY03 ests, respectively; Combined company boasts $3.02 in net cash per share; 12-month target price equals $19.

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