craig & ibexx, u r both right. hopefully Lu comes back. Ciena, Tellabs Call Off Merger Vote
By MARY PEMBERTON
Associated Press Writer
BALTIMORE (AP) -- Votes by shareholders on a $7.1 billion merger between Ciena Corp. (Nasdaq:CIEN - news)
and Tellabs Inc. (Nasdaq:TLAB - news) were called off Friday, just hours after AT (NYSE:T - news)&T Corp. said it
was no longer interested in buying Ciena's telecommunications equipment.
AT&T's unexpected announcement raised doubts about the proposed merger and could strengthen the hand of Lucent Technologies
Inc. (NYSE:LU - news), a far larger equipment supplier spun off by AT&T two years ago.
Ciena makes devices that enable fiber optic lines to carry more data, and Tellabs sells switching equipment to route large amounts of
data. New business from AT&T was considered critical to Ciena, which receives the bulk of its orders for telecommunications
equipment from Sprint Corp. (NYSE:FON - news) and WorldCom Inc. (Nasdaq:WCOM - news)
''Ciena has a lot of damage control to do now,'' Jeffrey Kagan, an independent industry analyst based outside Atlanta. ''Lucent is going
to be the dominant force.
Both companies rescheduled the votes, but the news pushed Ciena's stock down 45 percent to $31.25 a share. Tellabs' stock rose 9
percent to $62.43 3/4.
AT&T refused to comment Friday on why it was no longer interested in evaluating Ciena's equipment, which enables telephone
companies and other carriers to transmit Internet, faxes and other data over fiber optic cable without laying new lines.
In January, AT&T announced it was upgrading its network and was working with several vendors, including Ciena rival Lucent
Technologies.
Lucent announced this year it would offer a new product that would expand one fiber-optic network channel to 80 channels.
AT&T informed Ciena of its decision Friday morning, hours before shareholders of both companies were to vote on the merger, which
was announced in June. Ciena and Tellabs adjourned the meetings and rescheduled them for Sept. 9.
''We've got to do a lot of thinking and sorting and understanding,'' said Tellabs chief executive Mike Birk.
''We understand the surface issue, that AT&T has said, No thanks. We don't know why and don't know the implications.''
Patrick Nettles, Ciena's president and CEO, said AT&T's decision does not change the company's outlook.
''We continue to believe that Ciena is the market leader for high-capacity ... systems and that our future prospects remain strong,''
Nettles said.
Tellabs, based in Lisle, Ill., had proposed buying Linthicum, Md.-based Ciena in a deal that would make the company a Tellabs
subsidiary. Ciena shareholders would receive one share of Tellabs stock for each of Ciena's 108 million shares of stock.
The combination of the two makers of network equipment for phone data services would still be smaller than Lucent.
The merger also would end the independence of a remarkable start-up company, which grew rapidly but recently faced stiff
competition from Lucent in the dynamic telecommunications industry.
James S. Schmitt, an analyst with California-based Westcountry Financial, said Friday's development does not necessarily mean the
merger is off.
''For Ciena shareholders, it may go through on some revised basis,'' he said.
AT&T's decision was likely indicative of AT&T's ''close association with Lucent,'' he added.
Ciena introduced its MultiWave 1600 in 1996, which improved efficiency of optic fiber lines by 1,600 percent. Midway though the
year, it installed the product in Sprint Corp.'s network and announced that an upcoming product would improve fiber optic efficiency
by 4,000 percent.
When the company went public in February 1997, the initial public offering set a record for a start-up on the Nasdaq at $3.4 billion.
But last Friday, Ciena's stock dropped almost 24 percent after the company announced third quarter earnings would be sharply lower.
Ciena blamed the decline on a delay in a major order. It also said profit margins were hurt by price discounts for a major customer
which promised to make a large order |
