Ciena Rises on Optimism It's Still a Takeover Target
Linthicum, Maryland, Oct. 29 (Bloomberg) -- Ciena Corp. rose 26 percent amid optimism that the maker of equipment to boost the capacity of phone networks may still be a takeover target for a large telecommunications or networking company.
Ciena rose 3 3/16 to 15 7/16 in trading of 31 million, making it the most active stock in U.S. markets. Phone-equipment maker Tellabs Inc. scrapped its planned acquisition of Ciena last month after Ciena lost some contracts and issued a profit warning.
Michael Birck, Tellabs chief executive, said last week that Tellabs hadn't ruled out buying Ciena to get new technology and broaden its product line. Cisco Systems Inc., the No. 1 computer- networking company, also said it evaluated Ciena as a takeover target and decided not to buy it, and optical networking gear like that made by Ciena is in demand by other equipment makers.
''Ciena would be an interesting takeover target for a lot of people,'' said David Takata, an analyst at Gruntal & Co.
Important Technology
Though Cisco Chief Executive John Chambers said last month that his company decided not to buy Ciena, he added that Ciena's equipment is an important piece of networking technology.
Ciena's so-called wave division multiplexers, or WDMs, split beams of light on fiber-optic cables into many colors, allowing one strand of fiber to carry more information.
Because the equipment lets phone companies increase network capacity without having to install new cables, the WDM market is expected to grow 60 percent annually to $10 billion by 2001.
''It's the direction that networks are headed in,'' said Esmerelda Silva, an analyst at Forrester Research Inc. in Cambridge, Massachusetts.
Still, Ciena lost several major contracts during its most recent quarter, causing it to warn that fiscal third-quarter profit would be less than half of what analysts originally expected. The company is facing stiff competition from much larger rivals, including Lucent Technologies Inc., Alcatel SA of France and Pirelli SpA of Italy.
Linthicum, Maryland-based Ciena's shares have fallen more than 75 percent since Tellabs' original bid to buy the company in June, valued at $7.1 billion at the time. That offer was revised to $4.7 billion in August, and the purchase was canceled on Sept. 14.
16:44:05 10/29/1998
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