Ciena completes 7-to-1 reverse split

BUSINESS DIGEST

September 26, 2006|By Stacey Hirsh | Stacey Hirsh,Sun reporter

Ciena Corp., the Linthicum telecommunications equipment company, said yesterday that it completed a 7-to-1 reverse stock split and the company's stock would trade under a new ticker symbol for 20 days.

The reverse split, announced earlier this month and effective after the market closed Friday, reduced the number of Ciena's outstanding shares sevenfold, to 140 million from 980 million, and increased the per-share price by the same proportion.

In trading yesterday, shares closed at $29.68, down 35 cents from Friday's split-adjusted price of $30.03. The company is trading under the ticker CIEND for the next 20 days to call attention to the reverse split.

FOR THE RECORD - An article about Ciena Corp. in yesterday's Sun mischaracterized the shares affected by a reverse stock split. The number of authorized shares was reduced to 140 million.
The Sun regrets the error.

The company hopes the higher stock price will make its shares more attractive to a wider variety of investors, especially large funds.

"One of the primary purposes was to increase the stock price so that it could appeal to a broader range of investors," Suzanne DuLong, a Ciena spokeswoman, said yesterday.

Joseph Chiasson, a telecommunications analyst for Susquehanna Financial Group in Boston who does not own Ciena shares, said that while some institutional investors may still have a charter that prevents them from buying stocks below a certain price, typically about $5 a share, that practice is not as pervasive as it once was.

Fidelity International Ltd., Barclays Global Investors and the Vanguard Group Inc. are among Ciena's largest shareholders, according to filings with the Securities and Exchange Commission.

"These are all very reputable, large ... institutions who hold large positions in the company, so as far as the pre-split price being under $5 being a huge impediment to institutional ownership, I would not characterize that as the case," Chiasson said.

A high-flier during the tech boom, Ciena's stock soared to $149.50 in October 2000 and the company had nearly 4,000 employees. But after the bubble burst, Ciena suffered rounds of layoffs and saw its 2001 losses reach $1.8 billion. Its comeback strategy has been to grow its product line through acquisitions.

Over the past five years, Ciena acquired six telecommunications companies in deals valued at more than $2.1 billion. At the end of July, Ciena had about 1,400 employees, including about 600 in the Baltimore area.

Earlier this month, Ciena reported its 10th consecutive quarter of revenue growth and, excluding certain costs, its second consecutive profitable quarter.

Chiasson said some investors will look at the reverse split as a signal that management feels the company has significantly turned the corner.

"Most management teams will not invoke this unless they feel that they're sufficiently far along in their restructuring," he said. "This is sort of the last card that you would play."

stacey.hirsh@baltsun.com

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