Rival's note might have hurt Ciena Firm alleges e-mail traced to Lucent went to merger partner

False accusation alleged

Tellabs got message before releasing new terms, deal called off


September 17, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp. said yesterday that someone at one of its fiercest rival's facilities sent an anonymous e-mail message to its proposed merger partner, falsely accusing the Linthicum telecommunications equipment company of covering up product flaws.

The company said yesterday that with the help of "an independent source," it traced the e-mail, which was sent to Tellabs Inc., to a Lucent Technologies Inc. facility in Murray Hill, N.J.

"We have verified this and an independent source has also verified this. We are 100 percent confident," said Daniel P. McCurdy, Ciena's vice president for marketing and strategic transactions.

McCurdy said the message was sent to Tellabs at 3: 47 a.m. Aug. 28, just hours before Tellabs and Ciena announced the renegotiation of their troubled merger.

The merger, which was valued at about $4 billion under the terms of the renegotiation, was scrapped altogether on Monday.

The failure of the merger, which was initially valued at about $7 billion, has already attracted a number of conspiracy theories. Earlier this week, Ciena filed a document with the Securities and Exchange Commission stating that "a competitor may have engaged in targeted and legally questionable activities in order to undermine [Ciena's] market position as well as the proposed merger with Tellabs."

One event from the merger that raised eyebrows was AT&T Corp.'s announcement Aug. 21 that it would not buy any Ciena products. This disclosure caused Ciena and Tellabs to postpone shareholder votes on their merger, which were to take place that day. Some observers have speculated that the AT&T announcement, which Ciena called "oddly timed" in its SEC filing, might have been intended to help Lucent. Lucent formerly was part of AT&T.

Published reports yesterday referred to the e-mail, but yesterday was the first time Ciena confirmed its existence and alleged that it had originated at a Lucent facility.

McCurdy said the e-mail was intended to make it seem as if Ciena had flunked final product tests, and then tried to cover up those failures. McCurdy called the message "sophisticated disinformation."

He conceded that Ciena had failed some interim tests, but insisted that those problems were corrected before final testing.

"We wouldn't condone the kind of tactics Ciena is talking about," Lucent spokesman Bill Price said. "We have very high ethical standards about how we compete."

Price said Ciena had not contacted Lucent about the allegations. "We are looking into the matter," he said.

McCurdy declined to identify the "independent source" who helped track down the e-mail's alleged origin, saying only that "It's someone of stature." McCurdy said Ciena is still investigating the situation.

McCurdy shied away from accusing Lucent of illegal activity in the matter.

"All we have said is there are events that have occurred, and we would be irresponsible not to follow up on them," he said. "We have not alleged anything with [regard to] Lucent. We're just saying it came from their facility. Who knows who was in their facility at the time."

The message was received by Tom Scottino, Tellabs' manager of investor relations. Scottino was in his office early that morning to prepare for the renegotiation announcement.

"This one kind of jumped out, because I didn't really know what to make of it," Scottino said of the e-mail. He said he forwarded the message to Tellabs attorneys and to his counterpart at Ciena, Suzanne DuLong.

In other news, Ciena announced yesterday that it had won a small sales contract with DDI Corp., a Japanese telephone company. Ciena spokesman Denny Bilter declined to give the specific value of the deal.

Pub Date: 9/17/98

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