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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Zoltan! who wrote (27966)	8/27/1999 12:30:00 AM
From: Freeflight	Read Replies (1) \| Respond to of 77400

Chambers said "anyone who understood our market understood that optical transport was going to explode. The key is to watch the market and act."In an address at the DellDirect Conference in Austin, Texas, Chamber also said Cerent's rapid growth means that "it would have fetched a much higher number in an IPO." The deals represent one of Cisco's most aggressive moves yet into the hot market for optical networking, which uses fiber-optic cables to transmit data, voice and video across phone and data networks. They also should, analysts said, turn up the heat on such Cisco competitors as telephone equipment suppliers Lucent Technologies Inc. (NYSE:LU and Nortel Networks. It also lets Internet service providers change the effective size of the data pipe, known as bandwidth, almost on the fly. Service providers such as PSINet (Nasdaq:PSIX), a Cerent customer, could then allocate bandwidth in a matter of minutes rather than the several days now required, Cisco said. Of course, with a market cap above $220 billion, trading out $7 billion in stock isn't a huge sacrifice for Cisco, even if it's potentially the biggest-ever acquisition of a privately-held company. Cisco Chief Financial Officer Larry Carter told analysts that it would be only "neutral to slightly dilutive" to net income. Cisco will take a charge of 7 cents to 11 cents a share in the current fiscal first quarter for in-process research and development. "Everyone's really focused on the cost the deal. It's not like they're plunking down cash for this company," said James Slaby, an analyst at Giga Information Group in Cambridge, Mass. "What Cisco has done here is come up with table stakes to play in the carrier world. This suddenly makes them if not a heavyweight, certainly a middleweight in next-generation carrier networks." Analysts agreed that Cisco was spending as much for Cerent's customer list as for its Cerent technology. The buyers of Cerent's 454 have primarily been telecommunications companies, which typically give Cisco short shrift, preferring Lucent, Nortel and other long-established telco providers. Strong sales While Cerent is losing money -- it lost $29.3 million, or 54 cents a share, on sales of $9.92 million for the six months that ended June 30 -- its annual sales are now at a run rate of $100 million, Cisco executives said on a conference call. Cerent, in Petaluma, Calif., was founded in 1997 and now has 287 employees. In July, it planned to raise $100 million through an initial public offering, but analysts said it was obvious that Cisco had made Cerent an offer it could not refuse. Cisco already owned 8.2 percent of Cerent. The deal also came together quickly. Mike Volpi, who heads up Cisco's corporate shopping, contacted Cerent CEO Carl Russo, and the two met Aug. 11, at which time Volpi conveyed Cisco's interest in buying the 2-year-old firm, according to insiders familiar with the deal. Two days later, the two men sat down with Cisco CEO John Chambers, and within two hours, the three struck an informal agreement. Monterey Networks, of Richard, Texas, makes so-called cross-connect technology that boosts network capacity deep at the core of an optical network. It is now testing products with Internet service providers. Such moves are rapidly expanding the size of the market Cisco is addressing. According to Michael Cristinziano at Gerhard Klauer Mattison & Co. in New York, in 1998 it was addressing a market worth $20 billion and had about 50 percent of it. But by 2002, because Cisco is aggressively moving into new markets, Cisco's market opportunity will be $140 billion. Cerent's and Monterey Networks' technology "is something service providers lust after, and to be able to do it over state-of-the-art, high-bandwith optical equipment makes all the sense in the world," Cristinziano said. PC Week's Carmen Nobel reported from Austin, Texas. Material from Reuters was used in this story. this should raise Ciena market cap quick with european telecoms and NEC and other japanease telecom looking for photonic expertice...maybe they will partner or acquire Ciena...too bad Tellabs you lose..