Ciena supplies AT&T's upgrade

CoreDirector switch being used now in expanded network

Shares rise $1.01 to $10.47

February 12, 2002|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

AT&T Corp. said yesterday that it is using Linthicum-based Ciena Corp.'s equipment to upgrade its nationwide network.

The upgraded network carries Internet, voice, data and video traffic between more than 40 cities in the United States, and it is expected to be expanded well beyond those cities, according to AT&T.

The news comes at a time when the telecommunications sector is struggling.

Many companies have announced cutbacks in the past several months - including Ciena, which laid off 400 workers last week and significantly lowered financial forecasts for its fiscal fourth quarter.

"It's obviously very good news, offsetting some bad news with regards to sales prospects with some of their other customers that were cutting back," said Jay Ritter, a stock analyst who covers telecommunications equipment companies, including Ciena, for Morningstar Inc. of Chicago.

Ciena's shares rose more than 10 percent on the news yesterday, closing up $1.01 at $10.47.

Financial terms of the deal were not released. But Dave Johnson, a spokesman for AT&T's Network Services division, said the network upgrade - which also includes Cisco Systems Inc. equipment - is going to run into the tens of millions of dollars.

Johnson said 40 of Ciena's CoreDirector switches - which sense the best route for traffic on networks - have already been deployed, and many more will be added.

Ritter estimated that each CoreDirector costs $1 million to $2 million.

Analysts said yesterday that they had suspected AT&T was one of Ciena's new customers.

"We have been waiting for this announcement to come for a long time," said Rick Schafer, a research analyst for CIBC World Markets. Schafer said the deal is a sizable one and a positive for Ciena.

The deal is also a turnaround from nearly 3 1/2 years ago when AT&T said it would not be a Ciena customer, an announcement that helped to scuttle a $7 billion offer by Tellabs Inc. to acquire the Linthicum company.

In May, Ciena announced that AT&T was using its equipment designed for cities. But yesterday's announcement was the first news that AT&T was using Ciena's CoreDirector.

Denny Bilter, senior director of marketing for Ciena, said CoreDirector was chosen after a rigorous process at AT&T's laboratories.

"We feel this is going to be very good for us because it just really endorses what we've been doing in terms of our product," Bilter said. "So we're really excited about that."

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