In just the latest development emphasizing the importance of access and end-to-end solutions, CIENA Corp. today revealed plans to buy both access equipment vendor Catena Networks Inc., and optical Ethernet transport and switching solution vendor Internet Photonics.
The moves follow Nortel Networks’ announcement earlier this week that it has partnered with access vendors Calix, ECI Telecom and KEYMILE to deliver end-to-end solutions to service providers.
"The acquisitions of Catena and Internet Photonics are part of CIENA's ongoing efforts to fuel long-term revenue growth and sustained profitability by expanding our addressable market; capitalizing on new growth opportunities in adjacent and complementary markets," said Gary Smith, president and CEO of optical equipment vendor CIENA, which also today announced a net loss for the first fiscal quarter of $76.7 million, or a net loss of 16 cents per share. "In the simplest of terms, these acquisitions enhance the scope of the solutions we can offer our customers and further extend CIENA's network reach and presence.”
The near-term opportunity for carriers and enterprises, Smith says, “is optimizing delivery of any broadband service anywhere as opposed to any one specific service in any isolated portion of the network. That's why CIENA is integrating the best optical, data and access solutions to enable delivery of a wider range of broadband services."
CIENA plans to acquire Catena in a stock deal valued at about $486.7 million. Catena will become CIENA’s Broadband Access group following the deal. The group will be led by Jim Hjartarson, president and CEO of Catena.
Internet Photonics will also merge into CIENA, and all the outstanding shares of Internet Photonics common and preferred stock, and employee stock options will be exchanged for shares of CIENA common stock. The value of that transaction is expected to be approximately $150 million. Internet Photonics’ employee stock options will be converted into options to purchase CIENA shares. Following completion of the transaction, Internet Photonics will become part of CIENA’s Metro and Enterprise Solutions group and will continue to operate from its Shrewsbury, N.J., and Marlborough, Mass., locations.
Both deals are expected to close by the end of CIENA’s third fiscal quarter 2004.
Through the Catena deal, CIENA gets a good base of existing access customers. Catena has deployed more than 5,500 integrated broadband access solutions with RBOCs, major independent telcos and CLECs. BellSouth uses Catena's broadband access systems throughout its nine-state operating area.
“A key element of CIENA’s strategy is to drive future revenue and earnings by taking steps to expand our addressable market and the set of solutions we offer our customers,” says CIENA’s Smith. “By joining forces with Catena Networks, an acknowledged broadband access leader with meaningful revenue and a significant and complementary customer base, we accelerate CIENA’s path to profitability. We also gain access to a market that is expected to benefit as service providers shift spending to target the access portions of their networks, building out DSL and fiber-based access.”
For Catena, the CIENA deal “immediately and dramatically” enhances the scope of its sales and support resources – a task that otherwise would have required significant investment over several years, says Hjartarson. “With CIENA, we also have the ability to retain the momentum and energy of a young, next-generation company and the opportunity to play a significant role in CIENA’s transformation to a comprehensive networking solutions provider,” he adds.
Catena’s products deliver voice, data and video services over both copper and fiber infrastructures. CIENA says it will couple those products with CIENA’s multiservice DN7 family to give carriers “a compelling offering to enable new DSL, voice-over-packet and passive-optical-network services.”
Internet Photonics expands CIENA’s solution portfolio targeting multiservice operators and traditional carriers with the addition of a flexible platform for carrier-grade gigabit Ethernet solutions. Internet Photonics’ customers include six of the top ten cable operators in the U.S., including significant deployments by Cablevision and Adelphia, as well as carriers such as TDS Metrocom, who use Internet Photonics’ solutions to deploy Ethernet private-line services.
