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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (2356)	8/15/1998 1:03:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 12623

From tomorrow's Financial Times: >>> SATURDAY AUGUST 15 1998ÿÿAmericasÿ Tellabs-Ciena merger looks doubtful By Roger Taylor in San Francisco <Picture: logo>The planned merger between Tellabs and Ciena, two US telecommunications equipment companies, looks vulnerable after Ciena issued a profits warning just one week before shareholders of both companies vote on the deal. Tellabs announced in June its plan to buy Ciena in an all-share deal valued at $7bn at the time, but which is now worth about $6bn after sharp falls in both companies' stock prices yesterday. Although both said they would stick by the deal, the stock market showed little faith in their assurances and displayed a clear expectation the merger would have to be renegotiated. Until yesterday, the two stock prices were in line, reflecting the terms of Tellabs' offer of one of its shares for every Ciena share. Tellabs closed on Thursday at $71 and Ciena at $71 3/16. Yesterday, however, Ciena stock dropped 22 per cent, falling $15 to $55 3/8 after it announced its net income for the third quarter to August 1 was expected to halve. It said it hoped to make about 13-15 cents a share, against 34 cents for the same period last year, excluding one-time charges. Tellabs stock was also hit and dropped 17 per cent - or $11 11/16 - to $59 7/8 by midday, but remained at an 8 per cent premium to Ciena. The announcement of the link-up between the two companies was greeted as a strategic coup, with Tellabs linking its expertise in more traditional telephone equipment with Ciena's high-tech fibre optic technology. However, doubts have subsequently emerged about the security of Ciena's earnings, which come almost exclusively from two customers - Sprint and WorldCom, the two long-distance phone companies. Analysts have questioned whether WorldCom's acquisition of MCI would mean a review of its relationship with Ciena. Also, a long-hoped-for order from AT&T has failed to materialise. The company confirmed yesterday that AT&T had decided not to use its 16- channel DWDM technology. Ciena yesterday blamed the drop in income on the late receipt of revenues and on price concessions to a large customer. The latter point reflects the company's relatively weak bargaining position in dealing with its principal customers. Patrick Nettles, chief executive, said the latest results were evidence that the future financial performance of the company could be "significantly impacted" until it manages to "more meaningfully diversify" its customer base. >>>>