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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (3229)	8/22/1998 1:38:00 PM
From: craig crawford	Read Replies (1) \| Respond to of 7342

>> I have always contended that the purchase of CIEN was basically a technology issue << And I did not. The technology wasn't worth $7 billion in my eyes. It was worth more like $4 billion. In light of new information, maybe it's only worth $3 billion. >> But, if Ciena's technology is that important to the future of TLAB the deal will go through (although significantly modifies) << I don't disagree that the merger will probably go through. As everyone else believes, it will probably have to be modified to a more attractive price for TLAB. >> The difference is that the blue sky aspects will be stripped away, and the focus will be on the technology rather than on Ciena's book of existing business. << I agree, technology is about all that's left! Their business seems to be crumbling away. >> As to your point behind the value of the technology, who's to say? The market is currently telling us that with its projected earnings of say $.15 for the quarter the value of the company is around $3.2 billion, << Seems about right. >> Ciena's short term prospects as a stand alone company do not look particularly bright << Yes, it is becoming more apparent each day. >> It has a small customer base and limited product offerings which makes it extremely vulnerable to the loss of just one or two customers and product obsolescence. << True. I think CIEN has good enough technology/experience to become a serious player in the short-haul field. I considered CIEN's few large customers the bread and butter which was going to keep the company liquid as it diversified into the short-haul market. Obviously the short-haul market has yet to emerge and the long-haul market is getting crowded. I have always been more interested in Ciena's short-haul prospects than their current long-haul offerings. I considered long-haul a means to an end. >> Well, in the over all scheme of things I think it is a small thing. Look at it this way. The gross profit on the deal would be roughly $50 million, and the after-tax earnings would be roughly $35 million. As a single event, so what? But if this is an indication of how customers view Ciena's technology, it is a very big thing indeed! << That's what I meant. I wasn't referring to the actual dollar amount so much as the lack of confidence instilled from losing potential large customers. Still, $100 million is 15-20% revenues down the drain. Not to mention the millions of dollars and countless hours wasted courting AT&T for the last year. I also felt that if CIEN could work their way into being T's supplier of choice, (big pipe dream eh?) that it could expand into several hundred million dollars, not just $100 million. >> So let me ask you this: do you, as a TLAB s/h believe the deal should go through, and at what price? << I'm not a shareholder of TLAB or CIEN. Remember, I am a position trader not a buy and holder. Just because a company is listed in my profile as a favorite doesn't mean I am always long it. In fact there are times when I am short certain favorites in my profile. In answer to your question, yes I think TLAB should go forward and buy CIEN. If I was a TLAB holder and the deal was going to go 1 for 1 I would be extremely upset and dump TLAB. I'm sure it's either renegotiate the deal or it's off. If I was a CIEN holder I would want the merger to go through as well. I think it's in everyone's best interest for the deal to go through at a renegotiated price.