Ciena completes purchase of systems switching firm

$1.1 billion is paid for Cyras in stocks and debt acquisition

March 31, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Ciena Corp., which makes equipment for fiber-optic networks, has completed a $1.1 billion deal to acquire Cyras Systems Inc. of California.

Linthicum-based Ciena acquired all outstanding shares of Cyras in exchange for about 27 million shares of stock, in addition to assuming $150 million of debt.

The acquisition was valued at about $1.1 billion based on Ciena's $41.19 closing price Thursday, when shareholders approved the deal.

Privately held Cyras makes optical switching systems for metropolitan areas. The systems recharge wavelengths of light carrying information, protect the data being sent, reroute information if there's a break in the network and seamlessly drop off data at different points along the network.

Cyras will remain in Fremont, Calif., as Ciena's metropolitan switching division.

By acquiring the company and its product - called the K2 - Ciena can break into an $8 billion market for fiber-optic networks for metropolitan areas, the company said. Bill Rose, a spokesman for Ciena, said the K2 is in the final stages of testing and will be ready for commercial use within the first half of this calendar year.

"It seems to me they just wanted to make sure all bases were covered," said Prospero Roda, an analyst with Global Capital Securities in Baltimore.

When Ciena announced in December that it agreed to acquire Cyras, the deal was valued at about $2.6 billion based on Ciena's stock price of $96.37 per share.

But the Linthicum company's stock has since plummeted. Shares closed yesterday at $41.63, up 44 cents.

Roda said the stock is taking a hit probably because many companies in the industry have lowered their financial forecasts, and they fear that Ciena may follow.

But on Feb. 15, the company raised its financial forecast and said it expected revenue for fiscal 2001 to reach between $1.67 billion and $1.76 billion - 95 percent to 105 percent more than its 2000 revenue.

"I think the sell-off is more because of psychological and investor fears that Ciena might succumb to the slowdown," Roda said.

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