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Technology Stocks : TLAB info?

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To: John Carragher who wrote (3220)	8/22/1998 8:02:00 AM
From: John Carragher	Read Replies (3) of 7342

Barron's trader some notes on tlab/cien Wall Street's arbitrage community got burned Friday when Tellabs and Ciena postponed shareholder meetings on their merger at the 11th hour, sending shares of Ciena plunging 25 1/2 points to 31 1/4 . Tellabs had planned to purchase Ciena, a maker of telecommunications equipment that increases the capacity of fiber-optic cable. The stock swap was initially valued at $7 billion. Both companies were scheduled to hold shareholder meetings to ratify the deal Friday. But Ciena and Tellabs put off their meetings after Ciena disclosed that AT&T is no longer considering the purchase of its equipment, depriving the company of millions of dollars of potential business. Tellabs surged 5 3/16 to 62 7/16 Friday as arbitrageurs who had been long Ciena and short Tellabs rushed to cover their short positions. The arbs also dumped Ciena, contributing to its sharp selloff Friday. Analysts speculated that the deal may be canceled. If the merger is salvaged, it's expected that Tellabs will seek to renegotiate the terms, which originally called for a share-for-share exchange of Tellabs stock for Ciena stock. After the market closed Friday, Ciena issued a statement saying its business outlook hasn't changed despite the AT&T setback and that it continues to recommend shareholder approval of the merger. Tellabs is still assessing the situation. The potential collapse of the deal stunned Wall Street, where it had been viewed as a near-certainty as recently as Thursday, when the two stocks closed within 1/2 point of each other. Ciena is down from a peak of 92 3/8 in late July. It's surprising that the Street remained so confident of the deal because only a week ago Ciena signaled that its third-quarter profits would fall significantly short of expectations.

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