Once-hurting Ciena stages a comeback

Linthicum company's stock climbs 18% on earnings outlook

Possible takeover target

Shares that bottomed in 1998 at $8.1875 top $100 for 1st time

Telecommunications

February 17, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

Ciena Corp. shares rose 18 percent yesterday on expectations of good earnings numbers and speculation that the Linthicum telecommunications-equipment maker may be an acquisition target.

Analysts said there is talk on Wall Street that Juniper Networks Inc., another hot vendor of network gear, may be eyeing Ciena.

Ciena spokesman Aaron Graham said only, "It's our policy not to comment on speculation, and that's all it is at this time."

Juniper also declined to comment.

The speculation was the latest manifestation of a sentiment that has been building in the investment community: Ciena is back from the near-dead. With yesterday's rise of $18, the company's stock closed at $117.6875, the first time it has ended a session above $100. The boost came not only from the acquisition buzz, but also from optimism that the company will report another strong quarter when its fiscal first-quarter earnings sheet comes out after the close of markets today.

Just over a year ago, Ciena was the company nobody wanted to touch. Industry-watchers said Ciena's customer base was too narrow and its pockets too shallow to enable it to compete against bigger, richer telecommunications-equipment firms. Tellabs Inc. had agreed to buy the company for $7 billion, but called off the deal as Ciena's stock began to plummet. On Oct. 14, 1998, Ciena hit its all-time closing low of $8.1875.

Since then, Ciena has cobbled together a list of new customers for its signature product, equipment that uses optical technology to enable communications networks to carry more Internet messages and phone calls. In addition, it branched into other kinds of equipment, including gear that manages the movement of messages on networks.

Analysts said a Juniper-Ciena union would make sense. Juniper, in Mountain View, Calif., sells routers that determine which path an Internet message should follow on a network, technology that analysts said would dovetail neatly with Ciena's product line.

"Ciena has the transport technology; Juniper has the switching technology. That's a good combination. The two go together," said David Toung of Argus Research Corp. in New York.

Joseph Noel of Pacific Growth Equities Inc. in San Francisco said big network-equipment companies such as Cisco Systems Inc. are racing to figure out how to achieve the transport-switching combination and create extremely fast, fully optical networks. Such networks could handle messages more quickly and cheaply than most present fiber-optic networks, which use slower electronic gear to relay calls.

By joining forces, Noel said, Ciena and Juniper could jump ahead of competitors. "Ciena's not going to get there on its own," he said.

Juniper probably would not have much difficulty buying up a company or two. Founded in 1995, it went public in June at $34 per share and has never looked back. Merger talk frequently sends down the stock of the purported buyer. That did not happen yesterday; Juniper shares rose $7.625 to close at $220.50.

Juniper posted a $9 million net loss for 1999 while taking in $102.6 million in revenue. In 1998, the company's revenue was $3.8 million.

Juniper announced a $500 million convertible-note offering Feb. 4. In the statement disclosing the offering, the company said some of the proceeds may go toward acquisitions.

Pub Date: 2/17/00

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