Ciena Marks The Way Metro Area Should Go

November 25, 2009|By JAY HANCOCK

Ciena Corp. won't fill the hole in the metro-Baltimore economy left by the sale of Black & Decker. Not any time soon.

But Ciena's story should hearten people who worry about whether the region has an economic future as anything other than a lamprey attached to the Washington whale.

The fiber-optic hardware company was founded only in 1992. Five years later, it floated what was then the biggest initial stock offering by a start-up. It joined Standard & Poor's index of 500 major U.S. stocks in 2001. On Monday, it said it would double in size, thanks to its purchase of a couple of big divisions of Nortel Networks.

As Black & Decker boss Nolan Archibald is selling out to Connecticut-based Stanley Works, Ciena's Gary Smith is buying Nortel's most-prized units and running them from Linthicum.

That's the way healthy economies work. You try to keep what history has bestowed. But if you don't nurture the corporate sequoias of tomorrow, you end up looking like Detroit. That goes for cities, states and nations.

Having a Maryland headquarters has been "very positive," says Smith, Ciena's CEO. "We're able to tap into well-educated engineering talent, particularly in Northern Virginia and Maryland. I would also say the people we've brought in and moved here find it an attractive place to live."

Ciena's founders didn't even have roots here. They chose Maryland because it was a compromise between north and south, because universities and technology companies furnished a deep hiring pool, because it had a great airport and because the Chesapeake Bay was nearby.

It doesn't sound like the Nortel acquisition, which resulted from that company's entrance into bankruptcy proceedings more than a year ago, will add much to Ciena's headquarters employment of 600. The deal will double Ciena's size to about 4,000 workers, but most of Nortel's employees are in Canada.

"We've got sites all over the world," said Smith. "We're still going through the integration plan." The effect on headquarters, he said, "won't be clear until we get through that."

Like most businesses, both Ciena and Nortel have been plastered by the recession.

Even so, the deal brings power and market share to Linthicum. Ciena becomes the No. 1 seller of fiber-optic networking hardware in North America and No. 3 in the world, after Europe's Alcatel-Lucent and China's Huawei.

Buying the Nortel units should make Ciena eligible for the lower ranks of next year's Fortune 1,000 list of America's biggest companies. It'll join spice maker McCormick, electricity-seller Constellation Energy, financial firm T. Rowe Price and chemical maker W. R. Grace as Fortune 1,000 companies with metro-Baltimore headquarters. (Black & Decker, No. 408 on the latest list, might be part of Stanley by then.)

Typical of their peers in Maryland technology, Ciena executives haven't been much of a factor in Annapolis or business leadership groups such as the Greater Baltimore Committee.

"Some of the focus that they have, we can't add a lot of value to, to be honest," Smith said.

Maybe, but he also said that "the tax climate is challenging both at a personal level and at a corporate level" in Maryland.

He and other tech executives ought to get more involved in policy. Especially because Maryland's personal income tax, one of the highest in the country, is a disincentive for somebody to found the next Ciena.

Because of their corporate structures, start-up businesses often pay taxes at personal rates. Virginia, with most of Maryland's charms and a top personal rate of not much more than half of Maryland's (if you count local income tax), looks like a more promising venue.

Like Black & Decker, Ciena probably won't be based here forever. It almost got bought by Tellabs in the 1990s. It might mess up the Nortel acquisition and be sold to somebody else.

Maryland needs to lay the groundwork for its successor now.

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