Ciena news from WSJ comments
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September 15, 1998
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Now that their proposed marriage has crumbled
after a month of turmoil, where do Tellabs and Ciena go from here?
On Tuesday, shares of Tellabs rebounded slightly, while Ciena was flat,
after both were hammered Monday. Shares of Tellabs rose 3 9/16, or
6%, to 41 1/4 on heavy Nasdaq Stock Market trading, after dropping
16% Monday. Ciena slipped 3/16 to 13 on Nasdaq, after falling 17% the
previous session.
Meanwhile, the Nasdaq Composite Index
added 12.42 to 1678.11, while Morgan
Stanley's high-tech 35 index rose 3.22 to
557.52.
The big drops in Ciena and Tellabs' shares
came after the two
telecommunications-equipment firms called off
their merger deal, which would have had
Tellabs acquire the smaller company for about
$3.98 billion in stock. The deal started to
come unhinged last month after Ciena warned
of disappointing third-quarter results and said
that AT&T, a major customer, wouldn't give it
a key contract. A precipitous decline in
Ciena's stock forced the companies in late
August to revise Tellabs' earlier $6.9 billion
bid for the company.
As the deal fell apart Monday, Tellabs also
warned that its third-quarter earnings would
be flat with second-quarter results, while Ciena warned that its
fourth-quarter revenue would be "materially below" third-quarter levels.
Although the deal's demise was a major embarrassment for both parties,
Wall Street analysts don't believe it will squelch other acquisitions or
mergers for very long. Both companies are at the center of a rapid
convergence between voice and data networking technologies that is
leading to a flurry of dealmaking.
Tellabs, a maker of gear that helps phone companies manage traffic on
their networks, had hoped to use Ciena, a maker of "mulitplexing"
hardware that boosts the capacity of fiber-optic networks, to offer a more
complete set of products to customers -- part of a general consolidation
that shows no signs of abating.
In Tellabs' case, though, analysts believe the company will let the dust
settle before making a major move again.
"I would be absolutely shocked to see any major acquisitions announced
before the end of the year," said Michael Neiberg, an analyst ING Barings
Furman Selz. "The lesson that came out of this [failed deal] is they tried to
take a big bite. My read is they feel a little bit burned," he said.
Steven D. Levy, an analyst at Lehman Brothers, said he believes Tellabs
will remain acquisitive, but agrees that the company will have other
priorities in the near term. "If anything, they need to go in and repair their
relationships with major shareholders who have not enjoyed this
rollercoaster ride," said Mr. Levy. "I know that I did not find it particularly
entertaining," he said.
On Tuesday, Mr. Levy revised his 12-month price target for Tellabs' stock
to $75 from $100 because of the deal's demise and the broader turmoil in
the stock market.
Analysts said Tellabs could potentially partner or acquire a number of firms
to bolster its product lineup. Jim Kedersha, an analyst at SG Cowen
Securities, said the Lisle, Ill., company could look to do a deal with a
maker of high-speed asynchronous transfer mode, or ATM, switching
equipment, such as Ascend Communications, Fore Systems or Newbridge
Networks, or a maker of telecommunications access equipment like
Advanced Fiber Communications. Tellabs could also choose to consider
another pure-play multiplexing company, such as closely held Canadian
firm Cambrian Systems, analysts said.
"Tellabs had put out this idea they wanted to
be a top-three player" in the networking
arena, said Mr. Kedersha. "If they're going to
do that, they need to play in other areas."
For Ciena, the need to find a partner may be
even more urgent. Published reports have
already suggested the Ciena could be a
takeover target for Ascend. "They can't make
it on their own," said Greg Mesniaeff, an
analyst at Robinson-Humphrey Co. "They
don't have the critical mass in terms of size and the talent pool of people
who can do software development and systems-integration work."
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IMO, totally out-of-line and indicates very little knowledge of networking technology as well as what it holds for future; TLAB is in the field of TDM based digital cross conenct systems that are and will be quickly obsoleted; in corporate networking world it had already happened to NWK and NN; this will follow into the telecom aena and TLAB without CIEN, FORE or other new age networking companies, imo, will exponentially go down in revenue; imo, tlab will be less than half the price of today 2 yrs from now w/o any acquisitions;
and it said that CIEN lacks critical mass; in reality CIEN revenue is half of TLAB but the number of employees are only 1/4 of TLAB. And, "no critical mass for software talent pool", the person wrote this must be out-of-reality in software development or knows nothing of what software development really means, likely never ever wrote a single line of code; in booming silicon valley tons of talented software engs are working in companies much smaller than CIENA.
This is what happened when half-baked stuffs are then quickly digested by no-clue analysts and investors; hyped-up stocks being chased and real-value stocks being dumped
CIEN, within six months, imo, should triple current price
IMO, bandwidth demand alone can do it as bandwidth needs are doubling every nine months; others such as products with CSCO will be extra; IP/ATM directly over DWDM will be a tremendously large market; this is where the TLAB and all the telecom companies TDM, Sonet/SDH based switches will be pushed aside for the new generation IP/ATM over wave division routing; look at it this way; CSCO 12000 GSR will be able to switch and route directly with another 12000 using direct WDM. It cuts all the overheads of SDH and Sonet and the price/performance will beat the hell out of the telecom switches
now is the time to get Ciena when all these no-clue analysts are so scare to get in; they'll flock back in by droves at 35$ |
