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To: Jack Colton who wrote (12499)	3/21/1999 11:27:00 PM
From: rascalbythesea	Read Replies (1) \| Respond to of 42804

Interesting recommendation on CIEN... CIENA Corporation designs, manufactures and sells open architecture, Dense Wavelength Division Multiplexing ( DWDM ) systems for fiber optic communications networks (including long-distance and local exchange carriers). The company also provides a range of engineering, furnishing and installation services for telecommunications service providers. HIGHLIGHTS For the first quarter ended January 31, 1999 the company reported revenues of $100.4 million as compared to $145.1 million for the same period in the prior year. For the same period comparison, diluted earnings per share were $.02 as compared to $.37. March 16, 1999 - CIENA announced that it had agreed to but 2 privately held optical communications companies for $980 million in stock. The revolutionary acquisition of Lightera Networks and Omnia Communications will dramatically boost the market for CIENAs' products, and will allow the company to build more powerful networks at lower cost, in addition to allowing connection to local phone and data networks. **March 3. 1999 - CIENA announces expansion into Latin America. With the de-regulation of the Latin American market, CIENA plans to extend its leadership into this robust growth marketplace. OVERVIEW CIENA Corporation's long-distance DWDM solutions, the MultiWave 1600 system, the MultiWave Sentry 1600 and the MultiWave Sentry 4000, were designed to alleviate capacity (bandwidth) constraints in high traffic, long-distance fiber optic routes without requiring the installation of new fiber. The company's long-distance MultiWave systems include optical transmission terminals, optical amplifiers, optical add/drop multiplexers and network management software. CIENA's short-distance DWDM solution, the MultiWave Firefly, is designed for point-to-point short-haul applications (distances of 65km or less). This product contains no optical amplifiers and allows simultaneous transmission of up to 24 optical channels (utilizing different wavelengths, 24 times the amount of information can be transmitted over a single fiber) per fiber at transmission speeds of up to 2.5Gb/sec per channel. The companys' MultiWave systems are designed with an open architecture to allow them to interoperate with a carrier's existing fiber optic transmission system having a broad range of transmission speeds and signal formats. CIENA's continuing R&D efforts are targeted to broadening the product applications of its DWDM technology as well as integrating the technology as part of a more comprehensive approach to optical communications solutions. The company is a worldwide leader in field deployment of open architecture DWDM systems with more than 2 million optical channel kilometers installed. CIENA has substantially increased its customer base last year from 5 to 14, with Sprint representing its largest customer. The termination of the planned merger with Tellabs was a setback to the company, but the strong demand for high-bandwidth solutions and the companys leadership position should bode well for the company going forward. Service providers both domestically and internationally have widely deployed fiber optic cable, forming the backbone of their communications networks. Over the last several years carriers have faced several challenges resulting from a combination of factors including unprecedented traffic growth (Internet), changing traffic demands (increase in data transmission), growing competition (deregulation) and increased demand for reliability. CIENA's MultiWave DWDM systems enhance the transmission capacity of a single optical fiber, without requiring significant modification or upgrade to transmission equipment. All MultiWave systems are installed along segments of fiber optic routes, the beginning and end of which are defined by the presence of the customer's transmission equipment. As opposed to Legacy type system providers, CIENA offers its customers a flexible open architecture during a time of dramatic evolution in the communications industry. The company has built a portfolio of service capabilities offering full turnkey system deployment and maintenance for carriers and emerging carriers in formats ranging from a la carte to bundled turnkey deployment and maintenance packages (including facilities build-out, switch provisioning and integration of DWDM terminals with existing equipment). In April of 1998 the company announced a working alliance with Cisco Systems under which the two companies work together to overlay switching and routing technologies directly onto optical networks, enabling service providers to build more scalable and cost-effective architectures for the handling of data services. Together the two companies enable service providers to build high-capacity IP backbones by interfacing the Cisco 12000 Gigabit Switch Router (GSR) directly to CIENA's DWDM systems at 2.5Gb/sec without the need for additional intermediate network elements. Future activities between Cisco and CIENA are expected to include integration of additional platforms and interfaces, and they have jointly formed the Optical Interface Forum (OIF) to provide a venue in which vendors and users can agree on key specifications that will complement international standards activities while accelerating the deployment of optical internetworks. We view CIENA Corp. as a solid growth company positioned as a leader in providing the fiber bandwidth relief needed to unlock the new broadband services that the world demands. INVESTMENT SUMMARY We are initiating coverage of CIENA Corporation with a Strong Buy recommendation. Our 12-18 month price target is $45. The company has improved its gross margin from 31% to 34% (primarily cost cutting) and is confident that it can achieve its goal of 45% in 1999. We are estimating earnings per share of $.23 for 1999 and $.60 for 2000. While a number of CIENA's competitors have 40+ channel systems in various stages of trials, CIENA remains the only DWDM vendor to have deployed 40-channel systems into live carrier networks and has recently announced its first customer for its new 96-channel MultiWave Sentry DWDM system (London-based European carrier Telemonde Ltd.). The company continues to improve its customer concentration with the addition of European carrier Hermes Europe Railtel and Crosswave in Tokyo. Activity in the DWDM market has been increasing sharply and we expect to see a 75-100% increase in this market in 1999. The company's international sales account for approximately 40% of total revenues with the major growth in Europe (Asia is second) and for the first time the company has realized revenues from RBOCs (Bell Atlantic and an undisclosed Regional Bell). More importantly, with the acquisition of Lightera and Omnia, CIENA has transformed itself from a vendor of DWDM systems to a well-rounded supplier of next-generation managed transport solutions. Lightera's products provide dynamic bandwidth provisioning, management and traffic grooming, and scaling from 640 Gbps to 48 Tbps. They can switch in both the optical domain at OC rates and in the electrical domain down to STS-1 rates, and offer a host of protection and restoration capabilities associated with SONET networking (Synchronous Optical Networking). Omnia's products enable intelligent delivery of services to end-users through its next-generation AXR 500 Add-Drop multiplexer utilizing ATM technology. Both companies bring top management talent to CIENA and are world-class in their respective technologies. The combined synergies of these 3 companies creates formidable next-generation solutions for the networking industry. The effect of these acquisitions will enable CIENA to secure new business and exposes the company to a much more diverse and substantial marketplace (CIENA has more than tripled its addressable marketplace). In closing, we are initiating coverage of CIENA Corporation with a Strong Buy recommendation. Key Financial Data Price History Per Share Data Inc. Statement 52 Week Low........$8.12 Book Value............$4.65 Net Inc.(M)..........$53.19 Recent Price.........$23.75 Earnings.................$0.42 Revenues(M)......$508.09 52 Week High......$92.37 Cash......................$2.75 Share Data Fin Strength Misc. data Market Cap(B)......$2.56 Current Ratio...........6.11 Employees..............1380 Shares Out.(M)....107.82 LT Debt(B).................$0 HQ..........Linthicum, MD Float(M..................95.5 Total Cash(M).....$284.4 Rel Strength................50 Dividend Info. Short Interest Analyst Coverage Ann Dividend...........none Short(M) 2/99 ........4.44 Analysts.....................18 The information, statistical data contained within have been obtained from Ciena Corporation. or other sources believed to be reliable but in no way are warranted as to accuracy or completeness. We do not undertake to advise you as to any change in this information. This is not a solicitation of any offer to buy or sell. Research Week Inc. or its affiliates may have periodic positions in this security in connection with this security. Copyright 1999 All rights reserved.