Ciena stock jumps 26% Shares' recovery starts amid continued rumors about possible merger

Telecommunications

October 30, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp.'s stock continued to claw its way back from the abyss yesterday, gaining 26 percent amid a rebound in technology stocks and persistent rumors that the company might be a takeover target.

The Linthicum-based telecommunications equipment company's stock rose $3.1875 to close at $15.4375, its highest closing price since Sept. 22. Ciena was the most heavily traded stock in U.S. markets yesterday, with 31.05 million shares changing hands.

There is speculation that Tellabs Inc., a Lisle, Ill.-based maker of telecommunications equipment, might renew its attempt to purchase Ciena. The two companies canceled their planned merger Sept. 14 amid concerns about Ciena's financial health.

Tellabs President and Chief Executive Officer Michael J. Birck indicated in interviews this month that he has not closed the door on a new bid for Ciena. That sent Ciena's stock price up 30 percent Oct. 19.

Some Wall Street analysts said the potential revival of the Tellabs-Ciena marriage played a part in yesterday's market activity. "It looks pretty interesting," said Michael S. Davies of Punk, Ziegel & Co. in New York. "The rumor out there is that Tellabs is still perhaps interested. I just cannot believe the volume today."

Analysts said Ciena remains an attractive takeover target for Tellabs or some other company because of its technology. Ciena makes equipment that allows phone lines to handle more calls and Internet messages. The technology, called dense wavelength division multiplexing (DWDM), is in high demand as communications traffic continues to grow at a furious pace.

Ciena has said that it is interested in finding a buyer that would enable it to compete on a more even footing with Lucent Technologies Inc. and other big equipment companies.

"Although they showed weak profits in the third quarter, they still have the No. 2 position in DWDM," behind Lucent, Davies said. "We can't ignore the fact that DWDM is one of the biggest transport technologies to come along in a long time."

Ciena and Tellabs declined to discuss the possibility of a new merger. Ciena spokesman Denny Bilter said, "I can't comment on those speculations, and at this point that's all I see, speculations."

Potential buyers

Other companies that are often mentioned as potential buyers of Ciena include Ascend Communications Inc., Siemens AG and Cisco Systems Inc. San Jose, Calif.-based Cisco has said that it has looked at Ciena and decided not to buy it, but rumors of such a merger ersist. On April 20, the companies announced an agreement to link networking equipment, a move that many observers have seen as a possible prelude to a formal union.

Davies dismissed Cisco's denial of interest, saying, "I would think that's posturing."

Andy Schopick of Nutmeg Securities Ltd. in Westport, Conn., discounted the importance of takeover rumors in yesterday's Ciena surge and attributed the gain to "nothing other than the fact that many over-the-counter tech stocks have been in various stages of recovery."

The Nasdaq stock market index, which includes Ciena and many other high-technology stocks, has risen 24 percent since Oct. 8.

Stock's zigzag path

Yesterday marked another turn in the zigzag path of Ciena's stock. On June 3, when the company announced its intention to merge with Tellabs, Ciena shares closed at $61.75. On July 20, the stock hit its all-time high closing price, $88.625.

Then Ciena lost contracts and reported disappointing financial results and the cancellation of the Tellabs merger. Those woes were reflected in Ciena's stock price, which hit an all-time closing low of $8.1875 on Oct 14. The stock had fallen 91 percent in 12 weeks.

Schopick said Ciena was due for a gain because it had fallen so low. "Bear in mind, this stock got destroyed," he said. "It probably was never worth $90 and never worth $8."

Pub Date: 10/30/98

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