Ciena up on takeover rumors, new contract
Reuters Story - September 22, 1998 15:05
NEW YORK, Sept 22 (Reuters) - Shares of telecommunications equipment supplier Ciena Corp. rose 26 percent on Tuesday
amid rumors it may be a takeover target following its failed merger with Tellabs Inc. , analysts and traders said.
Ciena's announcement of a contract to supply new equipment to Japan Telecom Co. Ltd. also added to the share activity,
analysts said.
Shares of Ciena, the most active Nasdaq issue, gained 3-1/16 to 14-1/16 on volume of more than 16 million shares compared
with average daily volume of about 10 million shares.
"There's some acquisition rumors," said Kevin Slocum, a telecommunications analyst with SoundView Financial Group.
Slocum, who said he had no knowledge of whether the rumors were true, said Cisco Systems Inc. was rumored as a possible
buyer.
Cisco could not be immediately reached for comment.
Ciena spokesman Denny Bilter said he had not heard of any takeover rumors. Bilter said he could not explain the company's
stock activity but pointed to the company's announcement it would supply equipment to Japan Telecom.
Another analyst said takeover rumors have been circulating since Ciena and Tellabs canceled their ill-fated merger on Sept. 14.
That deal began to unravel after Ciena had its hopes for a major AT&T Corp. contract dashed and warned of
lower-than-expected earnings.
Ciena and Tellabs had changed the terms of their proposed stock-swap once but ultimately decided to call off the merger due
to Ciena's financial outlook and the likelihood shareholders would not approve the deal.
"During the Tellabs transaction, there had been another bidder interested in Ciena," Slocum said.
"But it would surprise me if Ciena were interested here since Ciena had thought it was getting a raw deal at a lower price (with
Tellabs)," he said.
Shares of Ciena had traded as high as 92-3/8 in July but had hit a low of 10-3/4 as the Tellabs merger unraveled.
Another analyst said he expected Ciena to work to restore its share price and strengthen its operations as an independent
company instead of selling out at bargain prices.
Earlier on Tuesday, Ciena said it landed a contract to provide Japan Telecom with equipment that increases the capacity of
fiber optic networks. Shipments of the product have begun and installation is expected to begin in the fourth quarter, Ciena
said.
Terms of the contract were not disclosed.
Ciena announced a similar contract last week with DDI Corp. , another new Japanese carrier competing against Nippon
Telegraph and Telephone Corp.
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