Ciena Corp. Expands into Emerging Market with Lightera Networks Acquisition

Strategic Insights -

Ciena Corp.'s move to buy Lightera Networks for $552 million in stock signals a bold entry into a new market for the telecom equipment provider. The acquisition of Lightera, a California-based company, would allow Ciena to jump on an emerging technology early in development. The market for products that route or switch wavelengths is expected to excel within three years, with carriers welcoming a way to add intelligence to the core of their DWDM networks.

Key Takeaways:

  • Ciena Corp. is acquiring Lightera Networks for $552 million in stock, signaling a bold entry into a new market for the telecom equipment provider.
  • Lightera is launching a product, the LightWorks optical switching platform, which switches wavelengths of light among dense wavelength division multiplexing nodes in fiber optic networks.
  • Ciena will have to carry the operating costs of LightWorks until at least the fourth quarter of the year, making it a risk for the company.
  • The market for products that route or switch wavelengths is expected to excel within three years, with carriers welcoming a way to add intelligence to the core of their DWDM networks.
  • The acquisition of Omnia Communications, another company being purchased by Ciena, adds provisioning capabilities for carriers, allowing them to support services from the DS-0 level to the OC-48 level.
  • Ciena's stock has recovered since the end of 1998, rising from $13.69 per share to $22.56 a share as of March 17.
  • Analysts agree that carriers will welcome a way to add intelligence to the core of their DWDM networks, with Ciena's acquisition of Lightera and Omnia set to capitalize on this trend.
  • Ciena's strategy has shifted from simplifying networks and lowering bandwidth costs to addressing the need for more advanced technologies to manage bandwidth, according to Steve Chaddick, Ciena senior vice president of strategy and development.
  • Chris Nicoll, principal analyst at Current Analysis, believes Ciena could raise revenues by adding switching to DWDM, with Lightera's product offering a better solution than traditional SONET technologies.

Statistics:

  • $552 million: The amount Ciena is paying in stock for Lightera Networks.
  • $429 million: The amount Ciena is paying in stock for Omnia Communications.
  • $13.69: The stock price of Ciena's stock on Dec. 29, 1998.
  • $22.56: The stock price of Ciena's stock on March 17.
  • 3 years: The timeframe in which the market for products that route or switch wavelengths is expected to excel.
  • $0.69 (or $2.00): The stock price drop of Ciena's stock since the Lightera and Omnia acquisitions were announced.
  • 20.6 million: The number of shares of Ciena's common stock being exchanged for Lightera.
  • 16 million: The number of shares of Ciena's stock being exchanged for Omnia.

Sources:

  • FON, March 8, 1999
  • Denny Bilter, Ciena Corp., 410/865-8677
  • Chris Nicoll, Current Analysis, 703/404-8497