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

To: Jay Rommel who wrote (3551)	9/23/1998 11:18:00 AM
From: Beltropolis Boy	Respond to of 12623

top brass is bottom feeding (given they're exempt from those new bargain basement options). i didn't see this posted, but my apologies if it's a dupe. Commentary: After spectacular debut, Ciena begins long hike back to respectability on Wall Street By Tom Steinert-Threlkeld September 22, 1998 3:04pm Jon Bayless is buying all the shares of Ciena Corp. stock he can put his hands on. And why not? The company's shares have tanked, in the wake of one of the most peculiar telecommunications mergers never to take place. From a peak of $92.38, the company's stock has plunged to $12 a share. That's about half of where it stood on its first day of trading in February 1997. You remember that day. Ciena off the bat was treated as a $2.1 billion company, the highest first-day value in history. So, if you're Bayless, who is Ciena's chairman and lead venture capitalist, it doesn't get any better than this: A second chance to create a windfall. If you believe that Ciena still is a market-beating company. Therein lies the rub. Eighteen months ago, Ciena had a simple story to tell. It had a technology, dense wave division multiplexing, that long-distance companies would beat down doors for. It had a means for squeezing more and more data onto an existing pair of optical fibers. Each frequency or "color'' could carry 10 billion bits of data a second. And this form of multiplexing meant each strand of fiber could carry 16 or 40 or 80 different colors. Maybe even 200. There's now talk of a single fiber carrying 25 trillion bits of data second. The problem now is that an advance in core communications technology that great does not go unpunished. Now, every networking gear maker worth its salt is developing its own dense wave technology. By some time next year, rivals could be pulling even or possibly ahead. It's not too dissimilar from the fate experienced by Netscape Communications Corp., which seemed to have the Internet by the tail - and then got clobberred by Microsoft Corp. Here, investors again got carried away with a Cinderella story. A small company with great technology has the chance, in this case, to become the "next" Lucent Technologies Inc. Only they forgot to ask Lucent about the equation. Lucent has hardly been sitting still since it was spun off from AT&T Corp. two years ago. Indeed, if anything, Lucent has been learning to speed up its internal research and development so it can bring new products like its WaveStar multiplexing technology to market in record time. <>Which means a company such as Ciena must battle not just the vast intellectual resources of Bell Labs, but the relationships that Lucent has cultivated for decades with more of its former brethren, the regional Bell operating companies. Indeed, Bayless is honest about the real attraction of the ill-fated merger of Ciena with Tellabs Inc. It was about sales forces, not technology. Tellabs was able to sell effectively to the Bell telephone companies and their emerging competitors in local communication services, the next battleground for dense wave division multiplexing. Tellabs had credibility that Ciena needed. But now, Ciena has to work overtime to repair its credibility. As the merger blew up, Ciena has shown itself, at best, to be at the mercy of forces beyond its control. At worst, it shows itself incapable of withstanding the heat turned up in the kitchen by rivals, customers and even short sellers. The big blow to Ciena's prospects was exquisitely timed, coming one hour before Ciena and Tellabs shareholders were to vote to approve the merger. That was AT&T Corp.'s announcement that it was halting testing of Ciena's 40-color systems and would not be a customer. The presumption: That AT&T would elect to go with Lucent instead. Even now, Bayless calls it "a political decision'' and implies the pullout could have been influence by the amount of stock that AT&T executives hold in the Lucent spinoff, not just special pricing and installation considerations that Lucent may have offerred. Then, there was the "very sophisticated piece of disinformation'' that vice president Dan McCurdy railed about, which purportedly emanated from a Lucent facility and allegedly affected AT&T's decision. Finally, there's Bayless' assertion that a denigrate-Ciena campaign had been orchestrated in media such as the Wall Street Journal by Rusty Rose, a Dallas investor best known as a former part-owner in the Texas Rangers baseball club. Rose, who wasn't available to comment, allegedly was exposed this summer by a large bet that Ciena's shares would decline and had to raise questions about whether the company's financial results were inflated. Bayless says it will now take a couple quarters for the company to "re-establish credibility'' with Wall Street. Given the amount of railing at hidden demons, that's an understatement. On Tuesday, it got that first bit of credibility when it landed a $10 million contract with Japan Telecom. There are also rumors that it's close to signing a similar deal with Bell South. What the company needs now, more than anything, is proof that its technology is sound and its market leadership intact. Otherwise, its credibility will not come back. zdii.com