Everyone on the Street believes Ciena is at a bargain basement price right now.
Where do you come up with this stuff? If this were true, the share price would be rising, as funds stumbled over each other to get in. Only a few lost souls on this thread think CIEN is a bargain. They are high risk right now, and no bargain. Forget that they ever traded at 90, or 70, or 50. It was WAY overpriced then.
The takeover would be viewed extremely favorably if it came in at or below .5 CSCO per CIEN.
Street might view .3 as appropriate given CIEN's current business outlook. This multiplier will be reduced as CSCO's share price increases, BTW. Probably lower than that today.
Unlike the Nortel buyout of Bay or TLAB's of Ciena, there would be no dilution in Cisco's earnings, IMO.
No one knows at this point whether CIEN would be dilutive to CSCO earnings, because the new estimates coming in for CIEN are so varying. If CIEN can truly earn $1.00/share next year then any price up to about 35 would be non-dilutive (CSCO's forward PE is in the 35 range), and anything below would actually be accretive. But, some estimates call for next year's earnings to be as low as .20/share. Then even a $10 buyout is dilutive in the first year.
With so much uncertainty where future earnings will be, I just can't see Chambers, or anyone, taking the risk of overpaying on a multibillion $ buyout. |
