Tellabs remark boosts Ciena Linthicum company's stock rises 30% after hint of another bid

October 20, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp.'s stock rose 30 percent yesterday after the head of Tellabs Inc. said his company hasn't ruled out the possibility of making another bid to buy the Linthicum-based company.

The two telecommunications equipment makers had planned to merge this summer, but the $7 billion deal was renegotiated and then scrapped after Ciena suffered a series of financial setbacks that severely eroded the company's stock value.

Asked in a CNBC interview yesterday if buying Ciena still held any interest for him, Tellabs President and Chief Executive Officer Michael J. Birck said, "Well, I would not say that it does not."

JTC Birck said of Ciena: "We certainly came to know them pretty well and have considerable respect for them."

These remarks, while hardly committal, helped send Ciena shares up $2.8125 to a closing price of $12.125. However, Ciena stock is a long way from regaining its strength. On July 20, when the merger with Tellabs was on track, Ciena's shares closed at an all-time high of $88.625.

Birck suggested that this gap between Ciena's past glory and present reality might pose an obstacle, since Ciena officials have balked at selling out for such a low price. "They see themselves as a 30- or 40-dollar stock, and would just as soon wait it out rather than sacrifice a fairly significant amount to get a deal done," Birck said. "So they may be around for a while."

Analysts said Tellabs and Ciena would still have good reasons for getting together. Lisle, Ill.-based Tellabs makes equipment that manages phone calls and other messages as they move along networks. Ciena makes gear that allows those networks to carry more messages.

"Strategically and technologically, there's no doubt that these two fit together like a glove," said Steven D. Levy, analyst with Lehman Brothers Inc. in New York.

Levy said that because of this compatibility, it is still quite possible that Tellabs and Ciena will rekindle their merger. "Mike [Birck] did not close the door on getting together with Ciena again," he said. "A year from now, I would not be shocked if they did get married."

Analysts said that while Ciena can survive by itself for now, it may have to get hitched sooner or later in order to thrive in an industry where firms have bulked up mightily through mergers and acquisitions. "They've got a hell of a lot of cash. They can go it alone," said Michael Neiberg of ING Baring Furman Selz LLC in New York.

However, Neiberg quickly added, "It's a tough world for companies Ciena's size. At the end of the day, they could have much bigger market share if they were part of a larger company."

Neiberg said there are several other foreign and domestic telecommunications equipment firms that might be interested in acquiring Ciena, including Ascend Communications Inc. and Siemens AG.

Ciena declined to comment on Birck's statements.

Pub Date: 10/20/98

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