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

To: Asymmetric who wrote (3139)	9/15/1998 6:53:00 AM
From: Asymmetric	Read Replies (1) \| Respond to of 12623

Tellabs Cancels Plans to Acquire Ciena; Firm's Sagging Prospects Doomed Deal September 15, 1998 By THOMAS E. WEBER Staff Reporter of THE WALL STREET JOURNAL Ciena Corp.'s planned acquisition by Tellabs Inc. finally crumbled after weeks of speculation that Ciena's sagging prospects would doom the union of the two telephone-equipment makers. News of the canceled deal sent the already-depressed shares of Ciena plunging an additional 17% -- putting them down a staggering 77% from the day before the deal was announced June 3. Tellabs shares, which have flagged in recent weeks over concern that the planned Ciena purchase was flawed, tumbled 16% as the company cautioned analysts to lower their earnings estimates. Separately, Ciena posted net income of $2.1 million, or two cents a diluted share, for its fiscal third quarter ended July 31, down 94% from $35.7 million, or 34 cents a share, a year earlier.Third-quarter revenue edged up 6% to $129.1 million from $121.8 million. Excluding a settlement charge and costs associated with the merger plan, profit at the Linthicum, Md., company would have been about 15 cents a share, essentially in line with Wall Street expectations. The merger's collapse marked the end of a 3 1/2-month saga. Though originally lauded as a union that would bring together two hot makers of telephone-network equipment with complementary product lines, the deal became untenable amid growing concerns about Ciena's business. One event that particularly unsettled investors was AT&T Corp.'s announcement last month that it wouldn't use a Ciena product. No 'Vote of Confidence' By the end of last week, it had become painfully clear that Ciena's plunging share price would necessitate at least a severe renegotiation of the deal's terms if not an outright scuttling. "The stock price did not reflect a vote of confidence for board approval," said Patrick Nettles, Ciena's president and chief executive. Some Key Signposts Along the Way: June 3: Tellabs Inc. says it will buy Ciena Corp. for about $6.9 billion in stock. Aug. 17: Ciena warns of disappointing third-quarter results. Aug. 21: AT&T Corp. says it won't buy Ciena's 40-channel fiber-optic system. Tellabs and Ciena postpone votes on their merger. Aug. 28: Tellabs revises downward the terms of its bid. The deal is now valued at $3.98 billion. Sept. 2: The companies postpone votes on their merger for the second time. Sept. 14: The Tellabs-Ciena deal is called off. Tellabs, Lisle, Ill., had originally agreed to pay one of its shares for each Ciena share. Last month, with Ciena's market capitalization falling, Tellabs renegotiated its bid to pay 0.8 share for each Ciena share. That cut the value of the deal to about $4 billion from $7 billion. Mr. Nettles said it became clear that a deal would only have been palatable to Tellabs at a bid much lower than 0.8 share for each Ciena share. "Our view was that undervalued Ciena," he said. The aborted deal has proved an embarrassment for investment banks Goldman, Sachs & Co. and Morgan Stanley Dean Witter & Co., which respectively represented Tellabs and Ciena. It has also been a disaster for Wall Street takeover traders betting on a completed deal. Even so, both companies maintained Monday that the merger would have been a good strategic fit. "I'm disappointed," said Michael J. Birck, president and chief executive of Tellabs. But earlier this month, with earnings concerns beginning to surface at Ciena, "we began to talk about how our shareholders would react. And I said, 'I think we're approaching the point of intolerance.' " Saturday Meeting Ciena's board met on Saturday to review options and concluded a deal was unlikely. Then on Sunday, Tellabs board members assembled to terminate the deal formally. Patrick Houghton, an analyst at Wheat First Union, agreed that the companies would have been a good match strategically. "But lately people were saying, there's no way this can be accretive" to earnings, Mr. Houghton said. Tellabs also cautioned analysts that third-quarter earnings per share would be essentially flat with second-quarter results. Ciena, meanwhile, said fourth-quarter revenue will be "materially below" third-quarter levels. In Nasdaq Stock Market trading Monday, Ciena stock fell $2.75 to $13.1875, while Tellabs shares fell $7.3125 to $37.6875.

To: Asymmetric who wrote (3139)	9/15/1998 7:06:00 AM
From: Asymmetric	Respond to of 12623

With Ciena, Investors Hit a Jackpot That's One for the Record Books The Wall Street Journal Interactive Edition -- June 5, 1998 <<Here's an oldie but goodie. Who knew then what lay just around the corner?????>> By GEORGE ANDERS Staff Reporter of THE WALL STREET JOURNAL A few years ago, Sacred Heart Preparatory School in Atherton, Calif., made a tiny investment in Ciena Corp., a little maker of fiber-optic transmission gear. Now the school is installing a new swimming pool, thanks to one of the biggest jackpots in the history of venture capital. This week Ciena agreed to be acquired by Tellabs Inc. for $7 billion -- an amazing deal for a company that had hardly any revenue, employees or value to its stock just five years ago. Investors who bought in early -- before Ciena went public in 1997 -- now can boast of 100-to-1 or better returns on their stock. Ciena's winner's circle is a curious mix of retirement accounts for blue-collar workers and private accounts for blue-blood sophisticates. These investors have little in common, except that they all put money into venture-capital pools. Back in 1994 and 1995, most investors didn't know a thing about Ciena. But venture capitalists were busily bankrolling its growth by buying privately held stock at prices as low as 20 cents a share. Ciena went public in early 1997 at $23 a share. Thursday, its shares closed at $61.50 a share, down 25 cents or 0.4%, in trading on the Nasdaq Stock Market. Teachers Cash Out "I just can't get over how well this has done," says Trish Taniguchi, an investment officer for the California State Teachers Retirement System. "It's unequaled by anything I've ever seen." Thanks to its participation in venture funds run by InterWest Partners of Menlo Park, Calif., the teachers' fund acquired 670,000 shares of Ciena a few years ago for a mere $256,000. Those holdings have been recently sold for total proceeds of $38 million. Other winners from middle America include the pension funds of AT&T Corp., General Mills Inc., Los Angeles county and state workers in Iowa and Illinois. All of them invest with InterWest or Ciena's other major venture-capital backers, such as Sevin Rosen Funds of Dallas, Charles River Ventures of Waltham, Mass., or Vanguard Venture Partners of Palo Alto, Calif. Hitting the Jackpot Ciena investors are getting one of the biggest payouts in venture-capital history Investor Initial Outlay Cost Per Share Current Value Kevin Kimberlin/$100,000/2.1 cents/$285 million California teachers/$256,000/38 cents/$38 million AT&T pension funds/$4.5 million/About $1/$250 million Weiss Peck & Greer/$5.1 million/$1.40/$223 million As Ciena gathered momentum in the mid-1990s, it didn't hurt to be well-connected. Some venture capitalists send their children to Sacred Heart. Harvard University, the University of Michigan and the University of California -- three heavyweights among university backers of venture capital -- all had stakes in Ciena. Individual partners in major venture-capital firms stand to make many millions from their stakes in Ciena. Venture capitalists themselves typically claim 20% or more of the profits from their funds' investments, before distributing the rest to passive outside investors, known as limited partners. In the case of the biggest venture-capital investor in Ciena, Sevin Rosen, that could amount to a $100 million or larger slice. Sevin Rosen's venture funds put $5.2 million into Ciena. That stake has soared in value to about $650 million. Saying No At least a dozen high-tech companies or venture funds turned down the chance to invest in Ciena early on. David Huber, founder of Ciena, based in Lithicum, Md., says he approached Apple Computer Inc. and Hewlett Packard Co., but got no further than some brief phone chats with mid-level managers. Another Maryland phone company invested $200,000 early on, but then asked for its money back, because it thought it had better uses for it. Those naysayers "just couldn't understand the technology, or they weren't willing to take the risks," Dr. Huber says. The very earliest investors, however, did spectacularly well. Dr. Huber got 6.2 million shares for "only a little more than it cost to file the incorporation papers," he recalls. He has sold some of his stake and has moved on to start another company, Nova Telecommunications Inc., but the Ciena stock he still owns is valued at about $310 million. Kevin Kimberlin, a New York financier who put up $100,000 in Ciena's first year, got 4.6 million shares in return. They currently are valued at about $280 million. Patrick Nettles, Ciena's chief executive officer, reported holdings of 4.3 million shares in a filing late last year with the Securities and Exchange Commission. Company officials say Dr. Nettles's stake was acquired for "pennies a share." It currently has a value of about $260 million. Also faring well are two foreign venture-capital groups. Japan Associated Finance Co. bought 5.8 million shares of Ciena in 1994 and 1995. It has distributed most of those shares to its Japanese backers, including Nomura Securities Co., Nissho Iwai Corp. and Sharp Electronics Corp. Barry Schiffman, president of Japan Associated's U.S. office, indicated that those holdings cost less than $10 million. Their current value tops $350 million. Star Venture, based in Munich, Germany, acquired 6.6 million shares of Ciena before the company went public. Officials at Star didn't return phone calls seeking comment. Ciena's 1,300 employees didn't strike it quite so rich. But they aren't complaining. Denny Bilter, the company's head of marketing, said all the employees own stock or have options in the company. Mr. Bilter declined to say how much stock he owns. But when asked if his gains were big enough to pay for his children's college education, he burst out laughing.

To: Asymmetric who wrote (3139)	9/15/1998 9:37:00 AM
From: gbh	Respond to of 12623

Peter, needless to say, I agree with your points as well. I'm only recently in the stock, but it's still a substantial loser for me. Many think the next 1-3 months might be interesting. I think they could be very boring... as the stock languishes in a fairly narrow range. We'll see. gary

To: Asymmetric who wrote (3139)	9/15/1998 1:14:00 PM
From: Kachina	Read Replies (1) \| Respond to of 12623

$5.5 billion melt away. Worth remembering that the stock market, like a bank, is an abstraction mechanism for legitimizing "funny money". Valuations increase/decrease "on the books" based on the the most current valuation of the last shares traded. But that does not mean that anyone could ever sell all shares for that price. This is never true. Similarly, a bank takes deposits, then loans out all but a fraction of that money, the banking system as a whole takes more deposits based on this "new money" in circulation, all but a fraction of that "new money" is loaned out, etcetera, etcetera. But it is never possible to pay out anything but a small fraction. When I look at these stocks, I think of them frequently in terms of how much has been paid for each independent share. Totaling that up over time gives you a more conservative valuation of the company. It can be estimated (kind of) by looking at total float, volume of the stock traded, and price of trade.