S. Korea deal raises Ciena $6

Linthicum company calls pact the largest of its kind in Asia

September 26, 2000|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Shares of Ciena Corp. climbed $6.8125 yesterday to a close of $127.5625 on news that the company struck a telecommunications equipment deal with Korea Telecom Corp. Ciena said it believes the deal to be the largest of its kind in Asia.

Ciena's 5.6 percent increase came after shares rose as high as $136.25 earlier in the day. Volume was 16.5 million shares.

Ciena shares split 2-for-1 Sept. 18, when they traded at $103.50.

South Korea's state-owned telecommunications company will deploy Ciena's networking equipment across seven metropolitan rings of fiber-optic networks, three based in Seoul, said Ciena spokesman Aaron Graham.

Korea Telecom will use the equipment to manage Internet and data network traffic, fueled mostly by skyrocketing demand for broadband services in its metropolitan service areas, said Graham.

Ciena, which had revenue of $571.2 million for the nine months that ended July 31, declined to estimate the value of the contract.

Subscribers to broadband services - which can transmit audio, video and graphics across high-speed connections - more than tripled in the first six months of this year in South Korea, from 295,000 to 916,000, according to a study by investment firm UBS Warburg LLC.

Ciena is looking to tap into that growth in Asia's Internet traffic over the next few years, said Graham.

"We definitely think it's momentum for us," said Graham. "It's a great expansion in the Asian market, especially a market like Korea, which has been called the broadband capital of Asia. ... We definitely view it as a good win for us."

With telecommunications carriers struggling to manage the data traffic boom on the Internet, analysts say Ciena's products, which boost network capacity, will be even more attractive to customers who are looking to make networks more efficient.

Paul Silverstein, an industry analyst with Robertson Stephens, an investment banking firm, called the deal "another good announcement in a string of good announcements."

"Ciena competes in the fastest-growing market in the telecom industry," said Silverstein.

"That market is in the eye of the demand that is sweeping through the communications equipment landscape."

Silverstein said the market for metropolitan-area networking is in its nascent stage.

He estimated the market at $150 million in 1999 and expects it to top $400 million this year, and grow 100 percent every year for the next few years.

"This announcement should reinforce the fact that Ciena is one of the early leaders in this marketplace," said Silverstein, adding:

This deal "will make it that much easier to win contracts [in Asia] in the future."

Wall Street has rallied behind Ciena as shares of the Linthicum company have more than tripled this year.

That's because Ciena has been on a tear.

The company reported an 81 percent increase in third-quarter revenue over the third period last year, to $233.3 million, and beat analysts' earnings estimates by 2 cents a share.

Two years earlier, the stock had staggered into single digits and Illinois-based competitor Tellabs Corp. walked away from a deal to acquire the company.

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