Ciena boasts of new client Linthicum firm defers naming buyer

stock climbs 27% to $21


November 03, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

As Ciena Corp. stock resumed its upward climb yesterday with a 27 percent rise, the Linthicum company for the first time confirmed that it has found a new buyer for its telecommunications equipment.

Ciena declined to identify its new customer or the size of the sales contract.

Company spokesman Denny Bilter said the identity of the customer would be made public before Dec. 10, the day Ciena is scheduled to release its fiscal fourth-quarter earnings report.

Murmurings of a possible new contract have helped turn Ciena's once-moribund stock into one of Wall Street's strongest gainers.

Ciena shares rose $4.625 to close at $21.8125 yesterday, and for the third straight session Ciena was the most heavily traded stock on U.S. markets, with 37.37 million shares bought and sold.

In three weeks, Ciena's stock value has more than doubled, reversing at least temporarily the company's long free-fall.

As recently as July 20, Ciena stock stood at its all-time closing high of $88.625. On Oct. 14, the stock lay splattered at its all-time closing low of $8.1875. The causes of this stunning fall were lost contracts, disappointing financial numbers and the cancellation Sept. 14 of the company's planned merger with Tellabs Inc.

The causes of the recent rebound are less obvious. Several analysts have insisted that the main reason for the rise is speculation that Ciena is ripe for another takeover bid.

"People think they're going to get bought. That's the one and only factor driving this stock," said Michael Neiberg of ING Baring Furman Selz LLC in New York.

However, other observers say Ciena's wagon is being pulled by the bull on Wall Street.

"I think it's just a very, very strong general market. Technology stocks are strong," said Tom Burnett of Merger Insight in New York.

Burnett added that some investors may see Ciena as undervalued. "People want to be involved with this company because it's traded so much higher in the past," he said.

Then there have been the contract speculations.

Ciena has been under intense pressure to land a major new customer ever since AT&T Corp. revealed Aug. 21 that it would not buy any Ciena products. That blow sent Ciena stock down 45 percent in a single day and helped doom the Tellabs merger.

Rumors of a sales deal have been fueled by the fact that Ciena is scheduled to give two out-of-state presentations to investor conferences this week.

It has been thought that the company might use tomorrow'sevent in Boca Raton, Fla., or Thursday's gathering in New York to unveil its new contract.

Ciena's Bilter said this is unlikely. "As a rule, we do not use those conferences to make major announcements," he said.

Theories about the identity of the buyer so far have centered on the Bell regional telephone companies. These firms have long been seen as an important market for Ciena's dense wavelength division multiplexing -- or DWDM -- equipment, which enables telephone lines to transmit more calls and data.

Ciena sells to two of the major long-distance companies, MCI WorldCom Inc. and Sprint Corp., and has signed sales agreements with Bell Atlantic Corp. of New York.

Among the other Bells, Atlanta-based BellSouth Corp. has been considered the likeliest new customer for Ciena.

Kevin Slocum of SoundView Technology Group in Stamford, Conn., said, "the only carrier that's been talked about as a win is BellSouth."

Slocum's firm is the sponsor of tomorrow's Boca Raton conference, but he said he did not know the identity of Ciena's new customer. He said he doubted that it is BellSouth.

A BellSouth spokesman, John Goldman, said yesterday that the company has selected a DWDM supplier but is not yet ready to announce that vendor's identity.

SBC Communications Inc. of San Antonio and Chicago-based Ameritech Corp., which plan to merge, each said they have not yet entered any final DWDM agreements. The only remaining Bell, Denver's US West Inc., declined to comment on its DWDM plans.

Pub Date: 11/03/98

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