jach, there really is no "track record" when it comes to acquisitions. Each stands on its own. CSCO has only purchased 1 company that was significantly beyond the development stage, and that was Stratacom, for $4B. Most people feel they overpaid, and in fact bought the wrong company. At the time, they owned a significant piece of Cascade, which today as part of ASND, is a much bigger player in the carrier space that CSCO wants badly to penetrate.
As far as CSCO "paying top dollar", and keeping "engineers happy", their first and only obligation is to their shareholders. They simply won't overpay for CIEN or anyone else. And twice the current price, and certainly $40, is WAY overpaying. You are of a similar mindset as Nettles when it comes to valuing this company, today. I think you and he may be alone in what you think the company is worth, today.
Fair price is market price. Until CIEN shows it can turn its business back into a growth business (6-12 months in both my and Nettles opinion), no hefty premiums will be paid by anyone.
And why do you continue to use basis revenue as a basis for an acquisition price. With this argument, CS would be worth $50. CIEN is fundamentally a mature business. Valuation must be based on the potential for future earnings growth for acquisitions of this size.
CIEN is a troubled company right now, primarily from the sales and marketing side. My opinion is that if a company like CSCO is really interested at around $18/share, by all means sell. It will only get tougher for small players to go against the likes of LU et. all, and CSCO woudl bring the 800lb gorilla aspect to each and every sales call. |
