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Ciena stock looks attractive following Cisco/Acacia deal, says analyst

Emily Bary

Jefferies analyst George Notter wrote Wednesday that Ciena Corp. looks to be the "primary beneficiary" of market-share consolidation in the optical-systems industry, following Cisco Systems Inc.'s announcement that it would be purchasing Acacia Communications Inc. in a deal valued at $2.6 billion. Notter wrote that optical innovation is happening more rapidly, requiring larger research-and-development budgets. "As such, smaller optical suppliers will increasingly struggle to keep up with vendors such as Ciena and Nokia which have sizable R&D budgets, own their core technology, and operate in scaled business models," he wrote. "We view Ciena as having reached an 'escape velocity' relative to the rest of the industry." Notter doesn't expect that Ciena is worried about the Acacia deal because Ciena's roadmap looks to be ahead of Acacia's by at least a year. Ciena shares have gained 28% so far this year, while the S&P 500 has risen 19%.