Tim: If Ciena thinks they can produce an 80 channel system, why don't you think Lucent can? We need to get past the denial of an 80 channel system.
SUN STAFF
Ciena Corp. of Linthicum, which has emerged as one of America's hottest telecommunications companies, is facing a challenge.
One of its rivals, Lucent Technologies Corp., has announced that it will offer a product that expands one fiber-optic network channel to 80 channels, dramatically increasing the amount of information that can be sent along communication lines.
Lucent's 80-channel system, planned for deployment in the fourth quarter of 1998, sets a new industry standard. Lucent and Ciena currently offer 16-channel systems. Ciena is testing a 40-channel system.
"This is proof that we're leapfrogging the competition, including Ciena," said Lucent director of optical networking Kathy Szelag.
Harry Bosco, Lucent's chief operating officer for optical networks, said, "This really puts a stake in the ground, showing that we are in the market-leadership position and intend to keep it."
Largely as a result of Lucent's breakthrough, Ciena's stock -- which debuted in February 1997 with one of the most successful venture-backed initial public offerings in history -- has taken a beating. The company's shares have fallen $7.19 on the Nasdaq market, a 12 percent decline, so far this week. They closed at $51.6875 yesterday, down $2.8125 for the day, on very heavy volume.
Ciena spokesman Denny Bilter acknowledged the correlation between Lucent's announcement and the decline in Ciena shares, but he rejected the idea that Lucent has gained the upper hand.
"Nothing's changed as a result of this," he said. "We understand that networks are moving to 80-channel. Up until recently, we've been the only vendor with 16-channel networks carrying traffic. When networks move to 80 channels, we'll be there, too."
The stakes in this battle are high. With the rise of the Internet and other information technologies, communications networks are burdened with more and more traffic.
Communications travel along fiber-optic lines in the form of light waves. Using optical technology, it is possible to break a single light wave into several different colors, each color representing a new channel.
This technology has expanded network capacity and turned Ciena, which was founded in 1992, into an Information Age success story. After the spectacular initial public offering, Ciena's first-year sales were the highest for any start-up in history.
Ciena has grown quickly. Its revenues expanded nearly sevenfold in the 12 months ending last Oct. 31. It now has more than 850 employees, and Bilter said it is adding as many as 10 a week.
Now Lucent, based in Murray Hill, N.J., is challenging Ciena for primacy in the telecommunications-equipment market. Tim Luke, an industry analyst for Lehman Brothers Inc. in New York, said of Lucent's announcement, "It signals that Lucent is really targeting this space. Ciena is a kind of thorn in their side. The perception was that Ciena is the leader in this area, and Lucent is very anxious to change that dynamic."
Bilter said the increased competition is a natural result of Ciena's success. "We've got a lot of people who are not real happy about what we've done," he said. "There are going to be a lot of people coming at us. If anything, it's an indication that what we've been saying about where the market is going is right on the money."
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