NEW YORK -(Dow Jones)- The proposed marriage of Tellabs Inc. and Ciena Corp. is off, but on-line investors are betting that Ciena -- despite its flaws -- will attract another suitor.
The deal between Tellabs and Ciena collapsed Monday, after weeks of speculation that it would be shattered by troubles that beset Ciena in the months after the pact was first struck. Its earnings prospects darkened as the company lost out on a key contract with AT&T Corp. and its stock plummeted.
But participants in on-line message boards still see value in Ciena, a Linthicum, Md., maker of telecommunications network gear. They expect another company to step up with an offer for the company.
And Wall Street analysts agree. Many believe Cisco Systems Inc. (CSCO) may be the one. Officials at Cisco, a San Jose, Calif., networking giant, declined to comment, citing company policy against discussing rumors or speculation. Ciena, for its part, said it wasn't involved in any merger discussions.
"Our plans are to stay independent right now. We haven't talked to anyone," a company spokesman said. "We think our business is strong, bandwidth demand continues to grow, we have a strong balance sheet with over $200 million in cash, a bunch of satisfied customers and strong manufacturing facilities."
But to many on Internet message boards and on Wall Street, those are all good reasons to believe another deal for Ciena will emerge.
"Ciena has great products, customers and research and development. It makes them look pretty attractive," said Bill Rabin, an analyst with J.P. Morgan Securities Inc., in New York. Ciena's products are used by telecommunications companies to boost the capacity of their fiber-optic networks. Its customers include Sprint Corp. (FON), WorldCom -- now MCI Worldcom Inc. -- (WCOM), Bell Atlantic Corp. (BEL), and Cable & Wireless PLC (CWP).
Joseph Nyi Nyi, an analyst at Gilford Securities, in New York, said Ciena would fit nicely with Cisco, whose primary business is in so-called routers, switches that direct data traffic on computer networks and ordinary telephone lines. "Cisco doesn't offer increased bandwidth [products], so [a Ciena acquisition] would make a nice niche market for them," he said.
"Strategically, [an acquisition] makes sense for a lot of companies. Cisco is one," added Steven D. Levy, an analyst with Lehman Brothers Inc., in New York. "Increasingly, Cisco is going to find that the Ciena product sits right next to it in the phone networks, they end up connecting to them."
Ciena and Cisco already have business ties. The companies have worked together to ensure that Cisco's products are compatible with Ciena's, said Tim Savageaux, an analyst at Volpe Brown & Whelan Co., in San Francisco.
Moreover, Savageaux said it wouldn't be out of character for Cisco to use an acquisition to expand its presence. For example, in 1996, Cisco acquired StrataCom, a network switch supplier, for $4 billion. This year alone, Cisco has made six acquisitions.
Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved
Dulles, VA /DenounceNewswire/ -- August 33, 1998 -- Fast on the heels of CompuServe's announcement last week of a new 800-number service (1-800-QUIT-CIS), America Online (NYSE: AOL) announced today its own 800-number service for customers who are mad as hell and aren't going to take it anymore. ...
"Due to the increasing demand for customer cancellations, we're announcing today the opening of our new AOL Exodus Center to streamline the mass defection of our customers," said Steve Case, chairman of AOL, in a prepared statement. "Think of it like Ellis Island in reverse." .
To reach the new Exodus Center, customers can call 1-800-QUIT-AOL between the hours of 4:00 to 6:00 am (EST) on days that begin with the letter F. "I know it's a challenge, but we're really striving to have completed subscription cancellations within sixty minutes of placing the call," says Case. "If you're still on the line after sixty minutes, well, all of our operators are busy or resting, and you'll just have to wait." Case figures AOL customers are used to waiting so he doesn't anticipate any problems. .
AOL claims that it can generate a tidy sum of cash for each departing customer, by selling survey results to competitors. "We will make at least $500 for each person who quits," Case says. "Our competitors are more than willing to pay us for our customers' demographic data, and we're more than willing to sell it to them. It cost us $200 to get the customer in the first place, and we're making $500 as they go out the door. That's a net of $300 per customer." .
After the announcement, AOL's stock lept to a six-month high of $140 per share. "Fewer customers mean fewer expenses, and that means higher profits," says one stock analyst with a buy recommendation who follows AOL, who added, "and the $300 per customer exit-revenue is just icing on the cake." .
Asked how long the AOL Exodus Center will be in operation, Case replied, "We'll keep it open until each and every AOL customer has quit, or we've gone out of business, whichever comes first."