Tellabs CEO Hints Revived Deal With Ciena May Be In The Works
Dow Jones Online News, Monday, October 19, 1998 at 15:30
NEW YORK -(Dow Jones)- Ciena Corp.'s shares soared Monday after the
chief executive of its former merger partner, Tellabs Inc., made
comments that some say suggested the companies might revive their failed
merger.
In midafternoon trading, Ciena (CIEN) was up $2.625, or 28%, to
$11.9375 on volume of over 17 million. Tellabs (TLAB) rose $2.875 to
$47.8125 on about 5.8 million shares traded. Both issues trade on the
Nasdaq National Market.
The two telecommunications-equipment makers called off their
once-celebrated merger deal last month after a series of blows to Ciena
made the terms untenable.
In a television interview, Michael Birck, chief executive and
president of Tellabs said Ciena is "a seemingly attractive opportunity,"
but didn't say whether the companies are talking about trying to rebuild
their deal. Birck said one problem with Ciena is the sharp disparity
between its depressed stock price and the company's view of its value.
But many Ciena followers construed Birck's remarks as an indication that
Tellabs still thinks it might like to buy Ciena.
Tellabs makes "digital cross-connect" switches that help phone
companies and other corporations manage traffic on high-speed data
networks. Ciena supplies the big phone companies with equipment that
boosts the capacity of fiber-optic networks. The Ciena merger, announced
in June, ran into trouble after Ciena lost out on two big contracts and
issued a profit warning.
The value of the merger, pegged at $6.9 billion when it was unveiled
in June, had been nearly halved after the companies reworked the deal
and investors continued to unload Ciena stock.
Originally, Tellabs was to acquire Ciena in a 1-for-1 stock
transaction. The ratio was scaled back to 0.8 share after Ciena warned
its third-quarter revenue wouldn't meet analysts' estimates and AT&T
Corp. said it wasn't going to grant Ciena a hoped-for contract. Then,
Italian rival Pirelli SpA beat out Ciena for a contract from privately
held Digital Teleport Inc., sending Ciena's shares into a deeper
tailspin.
Tellabs and Ciena shareholders originally were supposed to vote on
the merger Aug. 21 but Ciena and Tellabs delayed the meetings after
AT&T, a half-hour before that vote, phoned Ciena with the bad news. |
