Ciena/ONI deal done

Ciena Corp. and ONI Systems Corp. last week announced that shareholders of both companies approved their merger, a US$900 million deal announced back in February.

Acquiring ONI expands Ciena's products to include customer premises equipment and SDH technology, the optical standard used in Europe that could help attract new customers overseas, Current Analysis Inc. says. The combined companies will have a portfolio of metro access, metro core and backbone optical gear, with ONI's metro dense wave division multiplexing equipment expected to supplant the metro DWDM systems Ciena developed on its own, says Nikos Theodosopoulos, senior analyst for communications equipment at UBS Warburg LLC.

The companies also reduced their combined workforce by approximately 225 employees. Another 110 employees will be leaving within the next three months after assisting with the integration transition, Ciena and ONI said.

Ciena expects to save up to $65 million annually from this downsizing and other cost-cutting measures. But Ciena is staring down another hurdle.

Company President and CEO Gary Smith said the combined company's revenue this quarter "could be down meaningfully" from Ciena's stand-alone second-quarter revenue due to a lag in orders. Ciena's revenue in the second quarter, which ended April 30, was $87.1 million.

What's happening is that Ciena is deploying its CoreDirector optical switches for a customer but it might not get the check this quarter, Theodosopoulos says.

Recently Ciena announced a deal to resell an ATM/Multi-protocol Label Switching switch made by Equipe Communications Corp. in an effort to generate revenue to augment sales of its optical gear. Ciena is expected to soon announce a similar deal with multiservice edge switch start-up Gotham Networks Inc..

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More about CienaEquipe CommunicationsGotham NetworksOni SystemsUBS Warburg

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