Ahead of the Bell: Ciena and World Wide
Wednesday January 23, 9:13 am ET
Analysts Disagree on Ciena's World Wide Buyout; One Lowers Target, Another Stays Bullish
NEW YORK (AP) -- At least one analyst lowered his price target Ciena Corp., but another stayed bullish after the communications equipment provider said it would buy World Wide Packets, a provider of carrier ethernet services, for about $290 million in cash and stock.
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Jefferies & Co. analyst George C. Notter said he was "confused by the timing of the deal" considering its stock is down substantially from a 52-week high in October, saying the company is essentially giving away stock at a low price.
The deal "raises questions about company direction and the business outlook," he said in a client note. "We're not sure why Ciena was so compelled to do this deal given the timing and deal terms."
Notter kept his "Hold" rating and lowered his price target to $26 from $35.
However, Merriman, Curhan Ford analyst Tim Savageaux said the deal is "strategically and financially positive" for the Linthicum, Md., company, and kept his "Buy" rating.
World Wide's gross margins as well as its leadership potential in the rapidly growing carrier ethernet market should make the deal a success for Ciena, he said, noting that he would aggressively buy shares should they fall further.
Morgan Keegan analyst Simon Leopold kept his "Marker Perform" rating, saying in a research note that "limited disclosures will leave many struggling to assess the deal."
Also, the $290 million price tag may be too high, he said.
"We are uncertain how to value the deal considering the disclosures, but based on what we know, the acquisition seems expensive," Leopold said. "We see lots of promise from the market opportunity, but imagine the deal could pressure the stock," Leopold said.
Shares fell $1.27, or 4.9 percent, to $24.90 in premarket trading Wednesday.
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meanwhile one of cien's biggest backers suspended coverage because it advised on deal..
GSCO: CIENA Corporation EPS (FY Oct) 2008E $1.40, 2009E $1.92 Not Rated/Attractive (CIEN) 26.17
Moving to Not Rated
We have temporarily suspended the investment rating and price target for Ciena security. This is in compliance with Goldman Sachs policy in circumstances when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction
and in certain other circumstances...." |
