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

To: Mama Bear who wrote (2711)	9/6/1998 3:17:00 PM
From: Glenn D. Rudolph	Respond to of 12623

INTERVIEW-Tellabs committed to revised Ciena deal Reuters Story - September 03, 1998 17:59 %ELC %US %USC %RESF %TEL %ELI %MRG %HOT TLAB %CORA T V%REUTER P%RTR By Jessica Hall NEW YORK, Sept 3 (Reuters) - Tellabs Inc. Chief Executive Michael Birck said he is committed to the acquisition of Ciena Corp. despite the slide in the companies' stock prices and criticism of expected earnings dilution and revised merger terms. "We're trying to provide whatever assurances we can that this is a wise decision, in our judgment. It is one that has longer-range or strategic implications," Birck told Reuters in an interview. "Nothing has changed in that regard. We're disappointed that people have taken such a short-term view of this...but you have to balance your longer-term future against the thrill of the moment in seeing your stock price go up," he said. Telecommunications equipment maker Tellabs revised the terms of its proposed acquisition of rival Ciena last week, cutting the deal's value to about $4.7 billion from $7.1 billion. The revision had been widely expected after Ciena said its hopes for a huge contract from AT&T Corp. had been dashed and warned that its third-quarter results would fall short of Wall Street forecasts. "Some things have happened to them that seemed pretty bizarre...but I still think they are a strong company with excellent technology and good people," Birck said. Lisle, Ill.-based Tellabs needs Ciena's products, which increase the capacity of fiber optic networks, to break into some of the faster-growing segments of the telecom equipment market. Ciena, meanwhile, would gain access to Tellabs' broad customer base and experienced sales staff. Ciena, based in Linthicum, Md., has a limited customer base, and the market for its product line is becoming increasingly competitive. Combined, the companies will likely face price wars and may see profit margin pressures, analysts say. Ciena's recent string of bad news has slammed shares of both companies. The stocks slid further this week after the firms said the shareholder votes on the deal would be delayed until November. Previously, votes had been anticipated in September. The delayed votes added to uncertainty and raised concerns that more bad news could emerge before the deal closes, analysts said. Shares of Tellabs have fallen almost 54 percent since a peak in late July, before the bad news with Ciena began to unfold. On Thursday Tellabs shares were off $2.25 to $41.25, just above their 52-week low of $41. Ciena shares have lost 70 percent since late July. On Thursday they were down $2.46 to $26, a new 52-week low. Birck said he expects the deal to close in November, following the shareholder votes and regulatory reviews. "It will close in November. I don't see any reason why it should not," he said. Birck defended the revised merger terms, even though the acquisition will hurt Tellabs's earnings more than originally expected. "We'd always like a lower price. Everybody would....but I don't think we could have gotten the deal done...at a lower number. I think the thing would have broken apart if we had insisted on a lower number," he said. Birck said Tellabs would have likely lost a bidding war if Ciena had begun shopping itself around to other potential suitors. "One can conjure up another scenario where they go out and market themselves to someone else...under those conditions we probably would have not have prevailed. As a result, I think we would have missed out on a technology that we believe is essential in the future," Birck said. He said each side almost walked away from the deal, but always came back to the negotiating table because the original motivation remained strong. Birck said the merger agreement includes a clause allowing the companies to renegotiate or walk away in the event of a material adverse development. Tellabs has talked to Ciena's customers, looked at the technology and "done all the things that are appropriate to do to assure ourselves with a reasonable degree of certainty that there are no more than the normal sort of risks out there," he said. Tellabs must pay Ciena a break-up penalty of $100 million if it walks away from the deal. Ciena would have to pay Tellabs $200 million to walk away. Tellabs said it still has no information from AT&T regarding the reason or the timing of the decision not to further evaluate Ciena's products. Ciena and Tellabs found out about AT&T's decision on August 21, the day the merger partners' shareholders were originally set to vote on the deal. "It is still one of the most bizarre things I've ever seen, both in its timing and the way it was done," Birck said. Tellabs said it is not investigating the timing of or motive behind AT&T's decision. "We are not, but I think there are those out there who are doing some investigation," he said, without elaborating. Birck said he expects the combined company will be able to find new customers to make up any revenues that would have come from AT&T. Ciena said it expected less than $50 million in 1999 revenues from any potential AT&T contract. "Tellabs has never had a substantial amount of business from AT&T and we've still managed to survive," he said

To: Mama Bear who wrote (2711)	9/7/1998 12:58:00 PM
From: Daniel W. Koehler	Read Replies (1) \| Respond to of 12623

Barb Re: arb spread. You're right it's gone from .67 to .61 last week. If the arbs have "flipped" their positions(long TLAB short CIEN) it will be atypical of most merger plays because it assumes a broken deal. I just can't reconcile that with Birck's statements, unless Birck is engaging in a Pontius Pilate defense - he wants to have the shareholder's exculpate him by breaking the deal themselvesl. I rather think the arb flip was motivated by general market panic, a long weekend and a flight to quality. I look for that spread to narrow as Wall Street goes on a buying spree next week in response to Asian market strength, Greenspan's comments on easing and the 131 yen:$ ratio. Market correction has run 6 weeks, fundamentals are largely unchanged (interest rates low, commodity prices low save a blip up in oil prices, earnings ok) . We need a 5 day rally to squeeze the shorts out. Let's hope that Clinton doesn't implode and we get a gov't shut down again. I think the Reps will let the weakened Clinton serve out his term so they can run against him as the #1 campaign issue. In this climate the Libertarian Party ought to pull a lot of folks off the fences. Ciao, Daniel