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To: DMaA who wrote (2988)	8/14/1998 2:11:00 PM
From: djane	Read Replies (4) \| Respond to of 7342

Top Stories: Ciena Fails AT&T's Test thestreet.com By Kevin Petrie Staff Reporter 8/14/98 1:38 PM ET It gets worse. Ciena (CIEN:Nasdaq) this morning told investors that one major customer delayed an order and another extracted a huge discount. But it didn't mention possibly the worst news: It's lost a big prospective contract with AT&T (T:NYSE). Ciena's stock is getting hammered anyway, falling 16 1/4, or 22.8%, to 54 15/16. Ciena builds products that increase the capacity of optical-fiber networks. It expects to merge with network supplier Tellabs (TLAB:Nasdaq), a far more consistent player in the network-gear business, later this summer. Tellabs stock also is plunging, falling 11 11/16, or 16.5%, to 60. Much of the uncertainty, explained in the Heard on the Street column in today's editions of The Wall Street Journal, hinges on whether Ciena can land a fat future contract with AT&T. Tellabs said in recent Securities and Exchange Commission filings that AT&T would not use Ciena's 16-channel product, but only because rapid network growth has forced it instead to test a larger 40-channel system from Ciena. That left many bulls with the expectation that Ciena would get the business, though it would take some time. The technology, called wavelength division multiplexing, or WDM, pushes multiple channels of light through a single strand of optical fiber. But the fact is that Lucent (LU:NYSE) won the 16-channel business, an AT&T spokesman said in an interview this morning. That information has not been widely disseminated. Lucent shares were off 2 7/16 to 85 5/8. AT&T's decision means that Ciena might have lost the inside track for this business to Lucent, an AT&T spinoff. Ciena said this morning in warning of the third-quarter earnings shortfall that it could not exclude the possibility that AT&T would deploy other 16-channel or higher-capacity systems and "is not aware to what extent AT&T will do so." A Ciena spokesman says the company was late in delivering software for the 16-channel units. AT&T told Ciena it was paring back its workforce on the project, limiting AT&T's ability to test new products. "They asked us to discontinue the evaluation, and to redirect our efforts to the 40-channel system," the Ciena spokesman says. Earlier, the AT&T spokesman said, "Right now, we're buying everything in WDM from Lucent." AT&T activated its first 16-channel units from Lucent earlier this summer and will continue to deploy them until higher-capacity systems are available. AT&T tested 16-channel systems from both Lucent and Ciena, and apparently Ciena didn't pass the test. Many carriers prefer to have two vendors for a given product, but for now AT&T has one WDM vendor. And it's not Ciena. See Also OPTIONS BUZZ Options Quiet as Investors Watch Market Drop 7/28/98 2 PM TOP STORIES Networkers Struggle in Selloff 8/4/98 3 PM TOP STORIES Update Tellabs Parties On 7/16/98 9 AM TOP STORIES ARCHIVE Ciena Company Quotes Tellabs Company Quotes Lucent Company Quotes c 1998 TheStreet.com, All Rights Reserved. TOP \| ABOUT US \| CONTENTS \| SUBSCRIBE \| ADVERTISE \| TRADE ONLINE \| FEEDBACK \| SEARCH \| HELP