Copyright 2002 Toronto Star Newspapers, Ltd.

Toronto Star…03/22/2002

From LexisNexis

Ciena Corp., the maker of fiber-optic equipment that agreed to purchase rival ONI Systems Corp. last month, may buy more companies this year to bolster its line of networking gear, an executive said.

"Do we have everything we need? The answer is no," Steve Chaddick, Ciena's chief strategy officer, said in an interview.

The second-biggest U.S. supplier of optical equipment wants to add new products that direct traffic through cities using the Ethernet standard common in corporate networks, and gear that lets phone companies offer services that manage and store business customers' data, Chaddick said. Ciena is developing some equipment internally, but may need to buy smaller rivals to complete its product lines, he said.

While spending on networking equipment and software is expected to tumble 20 percent or more this year, Ciena and competitors such as Lucent Technologies Inc. and Nortel Networks Corp. say they must invest in products their customers will need once demand increases.

Ciena had $472.5 million in cash and $1.05 billion in short-term investments as of Jan. 31. Its shares rose 40 cents to $8.59 on the Nasdaq Stock Market yesterday. The stock has fallen more than 80 percent in the past year.

Chaddick said the company also may buy minority stakes in startups and resell their products to Ciena customers that may be reluctant to purchase gear from fledgling suppliers. If a startup succeeds in winning orders, Ciena may then buy the rest of the company, he said.

Ciena has invested in Equipe Communications Corp., a 2-year-old, closely held maker of phone switches. Chaddick said the startup, which is seeking a contract with Verizon Communications Inc., the biggest U.S. local-phone company, may stand a better chance if it can sell through Ciena.

Ciena agreed last month to purchase ONI Systems for about $1.2 billion in stock and debt. Three days later, Ciena reported a fiscal first-quarter loss and said sales this period will miss forecasts by almost $ 50 million.