WSJ article. Cisco's Vote of Confidence Gives a Lift to Ciena Shares
[djane comment. Isn't this more evidence of a possible LU/ASND merger? In prior articles, LU stated it doesn't want to partner with CSCO and will make acquisitions in the networking area. Now, CSCO partners with a key LU competitor. And, in the last CC, didn't ASND say it was working on WDM? Would LU be this partner? Just a thought.]
interactive.wsj.com
By LISA BRANSTEN, 4/21/98
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- A key endorsement from networking giant Cisco
Systems sent shares of Ciena up 6.2% Monday.
Shares of Ciena rose 2 7/8 to 48 1/2 on the Nasdaq Stock Market.
Meanwhile, the Nasdaq Composite Index gained 20.54 to 1887.14, and
Morgan Stanley's high-tech 35 index rose 12.44 to 565.93.
Under the agreement announced by the two
companies, Ciena and Cisco will work together
to ensure that Ciena's technology -- which
increases the amount of data that can be
carried by a single piece of fiber-optic cable --
works seamlessly with Cisco's data-networking
equipment.
Analysts didn't expect the deal to have any
immediate effect on Ciena's earnings or
revenue, but said that the relationship should
reassure customers and investors who had
been worried that the Linthicum, Md.,
company was losing its leadership position.
"This is a very large endorsement of Ciena
products," said Bill Rabin, an analyst at J.P.
Morgan Securities. "This is like the big boy on
the street walking around with the little guy and
saying, 'This is my friend.' "
Ciena is a leader in dense wavelength division
multiplexing (DWDM) technology, which increases bandwidth by splitting
fibers into separate channels that can carry data at the same time.
Salomon Smith Barney analyst Steve Levy said the deal is "another
indication that the market for [DWDM] systems is going to be pretty darn
huge."
Analysts believe demand for DWDM technology will increase as individuals
and business try to send more and more data over the existing long-distance
infrastructure. Ciena, analysts say, is in a strong position to grab much of
that increased demand.
"Ciena is clearly out there ahead of everyone else in terms of technology,"
said J.P. Morgan's Mr. Rabin.
NationsBanc Montgomery Securities analyst Bill Magill said he was also
encouraged by indications from Ciena's management that the company
would be able to keep second-quarter revenue about even with those of the
first quarter despite a dropoff in sales to WorldCom.
For much of last year, Ciena was a stock market darling. After going public
in February 1997 at $23 a share, the company's stock soared as high as 63
5/8 in October.
At the beginning of this year, however, Ciena
shares were battered by two pieces of bad
news. In January,
telecommunications-equipment giant Lucent
Technologies announced that it had developed
a technology similar to Ciena's. Then in
February, Ciena announced that telecom giant
WorldCom, which accounted for as much as
45% of Ciena's revenue, planned to scale back
orders.
Analysts largely believe that the stock will approach or pass its past highs
by the end of the year. Mr. Rabin forecasts that the stock will be back over
60 by the end of the year and Kevin Slocum, of SoundView Financial
Group Inc., said it would be back over its highs of last year sometime this
summer. Meanwhile, Salomon's Mr. Levy has a target of 65, and Mr.
Magill of NationsBanc has a price target of 56 by the end of this year.
Monday's Market Activity
Elsewhere in the technology sector Monday, Gateway 2000 rose 2 3/4 to
50 3/4 on the New York Stock Exchange. CS First Boston named
Gateway the featured stock of the week. It kept a "buy" rating on the stock
of the computer maker. After the close of trading Monday, Gateway, as
expected, unveiled a division to build more formal ties to dealers, in an
effort to reach the business market (see article).
International Business Machines rose 1 11/16 to 109 5/8 in primary trading
on the Big Board. After the close of trading, the computer giant posted
profit a cent a share above analysts' consensus estimate (see article). In
composite trading, the stock closed at 111 3/16, up 3 7/16 for the day.
Lexmark International Group gained 11 1/4 to 59 on the Big Board after
the maker of printers and printing supplies reported first-quarter earnings
that beat analysts' estimates by a wide margin (see article).
ISS Group slipped 1 3/8 to 49 on Nasdaq. Goldman Sachs initiated
coverage of the stock of the Internet-security company with a "market
outperform" rating, while UBS Securities initiated coverage with a "buy"
rating.
Omega Research rose 1/2 to 5 5/8 on Nasdaq. The data provider reported
a profit of $801,954, or four cents a share, beating First Call's consensus
analyst estimate of two cents a share. Revenue rose to $7 million from $6.7
million. Omega said major upgrade releases of its TradeStation and
OptionStation products will be made near the end of the second quarter.
Comsat slipped 1/16 to 38 9/16 on the Big Board. The satellite operator
posted a profit of seven cents a diluted share, reversing a year-ago loss (see
article).
Write to Lisa Bransten at lisa.bransten@news.wsj.com.
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