WashPost. Ciena Suspects Sabotage of Merger. Md. Firm Says Rival May Have Used Questionable Methods
washingtonpost.com
By Mike Mills
Washington Post Staff Writer
Wednesday, September 16, 1998; Page B11
Ciena Corp. said it was gathering evidence that an unnamed competitor
engaged in "legally questionable" activities to scuttle the company's
now-failed merger with Tellabs Inc. Some of that evidence includes an
e-mail message that a Ciena document says was traced to arch-competitor
Lucent Technologies Inc.
The Linthicum, Md.-based manufacturer of telecommunications equipment
made the unusual allegations in a regular filing Monday with the Securities
and Exchange Commission.
In the filing, Ciena said it has been "accumulating evidence that a
competitor may have engaged in targeted and legally questionable activities
in order to undermine the Company's market position, as well as the
proposed merger with Tellabs. The company has not yet reached any
conclusions regarding this evidence, and is continuing to investigate."
The document continues: "The company believes the short-term impact of
such tactics can be significant; in fact, the company believes at least some
of the adversity it has recently encountered is a direct result of such tactics.
There is no assurance that use of such tactics will cease."
Ciena also accused unnamed Wall Street traders of planting damaging
news articles about the company in an effort to drive down its stock price.
Ciena did not ask the SEC to take any action.
The Ciena and Tellabs merger was canceled Monday after a steady
decline in Ciena's share price made it unlikely that shareholders would
approve the deal. The decision capped a three-month ordeal for Ciena,
which had announced in June that it would be acquired by Tellabs for $7
billion.
Ciena's SEC filing did not name the competitor or provide details on any of
its allegations.
"We're investigating things at this point," said Ciena spokesman Denny
Bilter. "We have not concluded anything officially."
But over the past two weeks, as Ciena struggled to salvage its merger with
Tellabs, company officials privately speculated that Lucent, an equipment
company spun off by AT&T Corp. two years ago and Ciena's chief
competitor, played a role in the collapse of the deal.
Lucent officials have strongly denied any involvement in the collapse of the
merger. AT&T officials declined to comment on grounds that they do not
discuss relationships with suppliers.
The filing describes as "oddly timed" AT&T's Aug. 21 decision to drop
Ciena as an equipment supplier. AT&T informed Ciena of its decision less
than an hour before shareholders of both Ciena and Tellabs were set to
approve the merger. Less than a week later, Tellabs demanded a lower
price for Ciena and the deal was revalued at around $4 billion.
On Monday, as Ciena and Tellabs called off their merger, Ciena chief
executive Patrick Nettles called AT&T's Aug. 21 phone call to him "a very
peculiar coincidence," then added: "I don't believe in coincidences."
Sources said Ciena is investigating whether Lucent had any influence over
AT&T's recent testing of Ciena products, which increase the transmission
capacity of fiber-optics cables. AT&T leases laboratory facilities from
Lucent in a building the two companies share in Holmdel, N.J.
Also among the evidence the company is analyzing is an anonymous e-mail
message sent Aug. 28 to Tellabs public relations officer Thomas Scottino.
It accuses Ciena of falsifying test results to indicate its equipment had
complied with certain industry standards.
"I got it and I didn't know who it was from," Scottino said in an interview.
"I forwarded it to our corporate counsel."
Ciena conducted an analysis in an effort to determine the message's origins
and concluded that its sender had an Internet address registered to Lucent
Technologies in Murray Hill, N.J., according to a copy of the analysis.
"Ciena had it traced," Scottino said, though he said the results were not
shared with Tellabs.
Bilter said Ciena could not comment on the e-mail message or any other
potential evidence the company might be gathering.
Lucent officials did not return calls regarding the e-mail message.
c Copyright 1998 The Washington Post Company
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