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

To: llwk7051@aol.com who wrote (3308)	8/25/1998 6:55:00 PM
From: John Carragher	Read Replies (1) \| Respond to of 7342

Dow Jones Newswires -- August 25, 1998 Ciena Dn 7% On Concern Over Fate Of Tellabs Deal Dow Jones Newswires By Shawn Young NEW YORK (Dow Jones)--Shares of Ciena Corp. (CIEN) tumbled abruptly in the last hour of trading Tuesday as investors worried about the fate of its proposed merger with Tellabs Inc. (TLAB). Tellabs and Ciena, both telecommunications equipment makers, suspended separate shareholder votes on the deal Friday after AT&T Corp. (T) said it wouldn't order gear from Ciena as it had been widely expected to do. The news came a week after Ciena said third-quarter earnings would be more than 50% below expectations. The bad news from AT&T sent shares of Ciena, based in Linthicum, Md., down 45% that day and prompted widespread speculation that the merger, a stock-for-stock transaction, would be renegotiated, with Ciena fetching a lower price. Tellabs' board of directors met Tuesday to discuss the deal, but issued no statement after the meeting ended. "Right now, it looks like no public announcement is going to come out of that meeting," Tom Scottino, investor relations manager for Tellabs, which is based in Lisle, Ill. In the absence of a definitive statement, rumors swirled and Ciena's stock abruptly dived, ending the day down 2, or 5.5%, on Nasdaq volume of 9.9 million, compared with a daily average of 3.7 million. Tellabs shares slipped 1/16, or 0.1%, to close at 58 on Nasdaq volume of 10.4 million shares, compared with the typical day's 4.9 million. "There's speculation in the market that the deal may get broken," said SoundView Financial Group Inc. analyst Chandan Sarkar. He said he thinks it is more likely that the deal will survive on renegotiated terms. Ciena was attractive to at least one other bidder, widely believed to be Cisco Systems Inc. (CSCO), and on Monday, analysts speculated that too low an offer from Tellabs could prompt a rival offer. Investors, however, seemed to be weighing the possibility that no knight in shining armor will appear, traders said. Trading also seemed to indicate that investors are expecting a bigger cut in Ciena's price than analysts were discussing Monday. Analysts said then that Tellabs might offer 0.7 to 0.8 of its shares for each Ciena share instead of a one-for-one swap. With Tellabs at 58, that ratio would value Ciena at $41 to $46 a share, or $4.4 billion to $5 billion, compared to $6.9 billion when the original deal was announced in June. Some traders said Ciena's drop on Tuesday simply reflected uncertainty about the deal and the accompanying case of the jitters among investors. One arbitrageur who asked to remain anonymous said he had heard that AT&T backed away from Ciena because it wasn't satisfied with specifications for its product for boosting the capacity of fiber-optic lines. That is unlikely, said BancAmerica Robertson Stephens analyst Paul Silverstein, who noted that Ciena's products are being used by Sprint Corp. (FON) and other customers. "I don't believe there's a fundamental problem with the product," he said. He said he had heard, however, that there may have been a software problem that could have affected connections between AT&T's gear and Ciena's. But given that Ciena's products are performing well at other companies, it doesn't make too much sense to assume anything about AT&T's decision, which could have been made for a lot of reasons, he said. AT&T declined to comment on the matter and Ciena didn't respond to a request for comment. -By Shawn Young; 201-938-5248 Briefing Book for: CIEN \| CSCO \| TLAB Return to top of page \| Format for printing Copyright c 1998 Dow Jones & Company, Inc. All Rights Reserved.