Here's the TSC article (haven't read it yet
but probably has some nuggets of useful info -
I'll read it later tonight)
Joe
---------------------------------------------------------
By Kevin Petrie
Staff Reporter
4/20/98 1:53 PM ET
Ciena (CIEN:Nasdaq) landed a key ally in its battle with
rival Lucent (LU:NYSE).
Ciena's stock added 2 9/16 to 48 3/16 by noon Monday after
the company said it partnered with the commanding
networker, Cisco (CSCO:Nasdaq), to integrate Internet gear
and optical-fiber components in a cost-saving package for
phone carriers. Cisco was up 2 1/16 to 72 9/16. Lucent,
still the market's darling, gained 1 9/16 to 70 15/16 as
the S&P 500 slipped and the Nasdaq climbed. The shorts on
Ciena are beating a temporary retreat: The stock is up
more than 25% since April 6, though it still trades below
the low-60 level reached early this year.
Ciena has been battered by investor concern about delayed
contracts for its optical-fiber products and
saber-rattling from competitor Lucent. While it's hard to
fix a dollar value on the long-anticipated deal with
Cisco, Ciena clearly has added another dimension to its
growth track.
Ciena technology, called dense wavelength division
multiplexing, or DWDM, enables phone carriers to send
multiple channels of light signals through a single strand
of optical fiber. Phone carriers are installing DWDM in
order to ease bandwidth constraints caused by the
Internet. This month Ciena shipped its first 40-channel
units, which it can scale to 96 channels at the customer's
bidding. Lucent has only shipped 16-channel units,
although it promises to give AT&T (T:NYSE) an 80-channel
unit to test by year-end.
The plan, unveiled Monday, is to stitch Cisco's 12000 GSR
router -- a large, complex computer that phone carriers
use to ship data -- into Ciena's DWDM systems. A Ciena
official says the new products will be available this
summer. Lucent missed this chance to promote its DWDM
products; a Lucent official wouldn't say whether it has
been in talks with Cisco.
Jeffrey Diecidue, managing director at Unicom Capital,
which owns shares of Ciena, says the Cisco deal
underscores the ways that DWDM can expand its uses across
a network. He wouldn't say whether he's buying Ciena
Monday.
The Cisco-Ciena deal might spell lost business for Lucent
in another way -- down the road it might help supplant
other network gear called SONET, which is built by Lucent
and peers such as Northern Telecom (NT:NYSE). A phone
carrier "can take data traffic out of the router, plug it
into the DWDM and run it coast to coast without SONET
equipment," says Ciena spokesman Denny Bilter.
The alliance "definitely could put them a step ahead of
the Lucents of the world" in this market, says Craig
Armstrong, principal at the PITA Group consulting service
for technology purchasers.
Cisco will dominate the DWDM business if it takes off in
coming years, Armstrong says, pointing out that in late
July it acquired the private concern Skystone for its
optical technology.
In a concurrent announcement Monday, Cisco sketched for
investors a five-phase plan to integrate its switches and
routers with fiber-optic systems for cost-saving uses
throughout the network. Cisco, which excels with corporate
customers, has recently trained its efforts on building
business with carriers. However, AT&T's recent
high-profile outage might center on a faulty data product
from Cisco, which might bolster Ascend's (ASND:Nasdaq)
position with carriers.
In mid-February Ciena reported profits of $39.8 million,
or 37 cents per share, for the quarter ended Jan. 31, up
from $13.1 million, or 13 cents per share, one year
earlier. Revenue grew to $134.3 million from $53.9
million. While Ciena beat First Call expectations by 2
cents, many investors sold shares as it warned that the
major customer WorldCom (WCOM:Nasdaq) will slow orders
until later this year, leading to flat or lower revenue
for the April quarter.
Both Ciena and Lucent are seeing bullish action in the
options market today. Ciena, not a huge volume trader, has
seen more than 400 of its May 50 calls change hands in
early trading. The price of the contract, which has open
interest of just 489, rose 1/2 ($50) to 2 ($200) today.
Lucent, one of options traders' new darlings, has seen
more than 5,300 of its May 70 calls trade today, The price
of that open also was up slightly, 3/4 ($75) to 4 5/8
($462.50). Open interest in the Lucent May 70 calls was
deeper, with more than 16,400 contracts in play.
The action and open interest levels indicate bullish
sentiment on both companies, traders said.
End of Story
----------------------------
Thank God for cut & paste!! |
