Talk about your unambiguous Wall Street signals. Ciena Corp.'s stock tumbled about 12%, to $85, Tuesday after the telecom hardware maker said it will buy Cyrus Systems Inc. in an all-stock deal valued at $2.3 billion. Ciena says the deal should close in the first quarter of 2001, assuming it gets shareholder and regulatory approval.
Ciena would gain Cyrus' K2 Trans-Metro Optical Platform, infrastructure that can provide carriers with high-speed fiber-optic networks for metro-area businesses and consumers.
The buyout would beef up Ciena's Core Directora products and make it a stronger competitor to Redback Networks Inc. and Cisco Systems, Morningstar analyst Jay Ritter says. The deal would hammer Ciena's earnings by 30% next year, he says. Although Ciena's stock isn't at its all-time high, it's doing well when compared with others in the industry, he says. "The stock is just down now because people are uncertain as to what types of revenues the combined companies will bring in from their new products."
Ciena is trying to fill a hole in its product line, Ritter says. "Before this acquisition, they didn't have a presence in the metropolitan-access market."