Lucent stumble is Ciena gain

Linthicum firm's stock rises 26% after snarl in rival's production


January 08, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp.'s stock rose 26 percent yesterday on some bad news from one of its most formidable rivals, Lucent Technologies Inc.

Lucent shares fell more than 20 percent after the company stated that its earnings would be lower than expected for the last three months of 1999.

The announcement, released after the close of markets Thursday, in part blamed Lucent's failure to meet demand for equipment that greatly expands the number of calls a fiber-optic network can handle.

Ciena, which makes such equipment, saw its stock zoom $11.875 to close at $57.75. Yesterday's rise was the latest surge forward for Ciena shares, which closed as low as $8.1875 two years ago when the company was beset by financial troubles.

In recent weeks, the Linthicum company's stock has benefited from Wall Street's general enthusiasm for companies that offer ways to increase the capacity of communications networks.

"What it [Lucent's announcement] has done is definitely make people take a closer look at Lucent's competitors," said Ciena spokesman Aaron Graham.

Ciena was not the only gear-maker that saw its shares rise sharply in response to Lucent's woes. Cisco Systems Inc. went up $5.875 to close at $105.875; Nortel Networks Corp. gained $20.25 to end at $97.25; and JDS Uniphase Corp. climbed $30.1875 to $179.9375.

Lucent lost 30 percent of its stock value in after-hours trading Thursday evening. After the opening of markets yesterday, Lucent shares edged up $2 to close at $54.

Just over 179 million shares of Lucent were traded yesterday, a single-day record for U.S. markets.

In its announcement Thursday evening, Lucent listed a handful of reasons for its anticipated earnings shortfall, including lower software revenue. But what sent Ciena's stock soaring was Lucent's inability to move quickly enough on shipments of gear that can give a fiber-optic line 80 times its normal capacity.

Such high-capacity equipment represents a significant increase from earlier generations of the technology, which is known as dense wavelength division multiplexing or DWDM.

Earlier versions of DWDM could increase a line's capacity up to 40 times.

Ciena has introduced a product that can boost a line to 96 times its normal capacity. The company is seen as one of Lucent's main rivals in the high-capacity equipment sector.

Such equipment is in great demand as telephone and Internet companies try to accommodate the growing consumer use of communications networks.

"Lucent's stumbling in the high-end DWDM area, and that's where Ciena participates," said Timothy Savageaux, an analyst with Prudential Volpe Technology Group in San Francisco.

Lucent, a Murray Hill, N.J.-based spinoff of AT&T Corp., is far larger and more diversified than Ciena, but for now Ciena's area of expertise happens to be hot.

Mark Cavallone of Standard & Poor's in New York said, "Ciena's solely focused on optical networking, as opposed to Lucent -- and it's positioned to do very well in that market."

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