Ciena, Tellabs Call Off Merger

Ciena Corp. ended a miserable three-month courtship with Tellabs Inc. Monday as the two telecommunications equipment makers decided to go their separate ways.

The planned merger between the two companies was scrapped after it became clear that Tellabs (TLAB) shareholders would not approve the deal, whose value had already been slashed, the companies said.

The final straw came last Wednesday when Linthicum, Md.-based Ciena (CIEN) lost another major contract with one of its customers, Digital Teleport Inc. That sent its stock plummeting again. The stock has fallen to about $15 a share from $90 during the summer. Tellabs has also suffered: its stock now stands at 45, well off its 52-week high of 93 1/8.

Symbol Lookup

Tellabs (TLAB)

Ciena (CIEN)

To calm anxious shareholders and shore up sagging support for the merger, the value of the stock-for stock deal, was cut to $4.7 billion from $7 billion. But that was not enough in the face of the blizzard of bad news surrounding Ciena.

Tellabs initially wanted to acquire Ciena to fortify itself against larger rivals, such as Lucent Technologies Inc. (LU) and Northern Telecom Ltd. (NT).

"We continue to believe that Ciena's products and technology would have provided a good fit with Tellabs' business," Tellabs CEO Michael J. Birck said. "However, in light of the changes in Ciena's financial outlook and since required approval of the transaction by Tellabs' shareholders is unlikely, we have therefore mutually agreed to terminate the merger agreement."

Said Ciena CEO Patrick Nettles: "While we are disappointed that our plans with Tellabs will not come to fruition, we remain excited about our future as an independent entity.

"Over the short-term, Ciena will continue to face the challenges associated with expanding our customer base, but the core elements of our bsiness remain strong," he said.

Shares of Tellabs rose 1 to 45 Friday. Ciena shares fell 3/8 to 15 15/16.

Written By Jeffry Bartash