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SDN architectures

Cyan Says It Wasn't Starving Before Ciena Bid

While Cyan has appeared since last year to be a likely acquisition candidate, company officials say the firm wasn't looking to sell before Ciena offered a bid of $4.75 per share. They also made the case that Cyan's financials recently were on the upswing, reporting a first-quarter year-over-year revenue jump of 89% as part of Monday's announcement of its agreement to be acquired by Ciena.

"Ciena approached us," Cyan Inc. President Mike Hatfield tells Light Reading. He adds that Cyan was not looking to be acquired even though the company late last year was forced to seek new financing through a notes sale to support ongoing operations. (On the Monday conference call announcing the deal, Ciena Corp. (NYSE: CIEN) officials declined to answer a question from Needham & Co. analyst Alex Henderson about the implication that Cyan had "shopped this product by evaluating their options.")

Late last year, Cyan admitted that it was taking longer than expected to convert a bevy of Blue Planet software trials into contracts and revenue. It subsequently announced the note sale in December. (See Cyan Seeks Funding in SDN Squeeze and Cyan to Net $46.6M in Notes Sale.)

Soon after, Cyan showed improvement, announcing a contract with CenturyLink for its Blue Planet software, claiming a second RFP win and reporting a revenue increase for the fourth quarter of 2014. However, it also reported lower revenue for the year and a deepening net loss. (See Cyan's CenturyLink Win Built on Experience, Flexibility and Cyan Claims Carrier Wins, Revenue Jumps.)

Still, Hatfield says Cyan's first-quarter 2015 numbers, which were scheduled to be revealed Tuesday, but were unveiled Monday as part of the acquisition announcement, show further improvement. "We are on a roll," Hatfield says. "Our first quarter this year showed significant growth over our first quarter last year."

For the first quarter, Cyan posted about $36 million in revenue, up 89% from the $19 million it reported a year ago, and up 18% from the $30.5 million figure it posted in the fourth quarter of 2014.

Cyan's stock price jumped in early April to around $4.25 per share, after languishing well under $4 for several months before that. In recent weeks, it had dipped below the $4 mark again. Following Ciena's acquisition announcement, Cyan's share price peaked Monday at the deal price of $4.75, and as of this morning had a trading range of $4.53 to $4.66.


Want to know more about the optical sector? It's sure to be a hot topic at Light Reading's second Big Telecom Event on June 9-10 in Chicago. Get yourself registered today or get left behind!


Though the first-quarter numbers are promising, it's largely unclear what the future holds for Cyan employees, and for any of the company's products that are not called Blue Planet, even though the majority of the company's $100.5 million in revenue during 2014 was derived from hardware products likes it Z-Series optical family. Michael Genovese, managing director at MKM Partners, states this week in a research note that Cyan's respective hardware platforms may "overlap technology-wise with Ciena's, but not as much customer-wise."

Hatfield adds that for now, "It's business as usual for us. This [offer] doesn't change at all how we're addressing the opportunities in front of us. We'll go through transition planning after the closing, but Ciena and Cyan share the common view that our customers come first."

Hatfield echoes a statement made by Ciena officials as they announced the Cyan acquisition Monday -- their claim that not a single customer was lost when Ciena acquired Nortel's MEN business more than five years ago. Still, that acquisition did give Ciena a brief case of financial hiccups. (See Ciena Still Having Some MEN Issues.)

Francois Locoh-Donou, senior vice president of global products at Ciena, tells Light Reading that it's too early to talk about how the companies and their products will be integrated. But, he says Ciena already has its sights set on converting Cyan's many Blue Planet lab test and trial participants into revenue. "There's an ability to close some sales, with the scale and critical mass that we bring to Cyan. Some of the Tier 1 carriers they engaged on their own, but being part of Ciena gives them a much higher probability of closing those sales."

He adds, "With this kind of SDN/NFV software, revenue realization is a bit further out. From 2012 to 2014, it was a two-year migration from academia to service providers trying to understand what was in it for them. Now, with orchestration software in particular, we're seeing more RFQs and real selection processes starting to happen."

— Dan O'Shea, Managing Editor, Light Reading

Atlantis-dude 5/6/2015 | 1:38:11 PM
Re: Ciena's Influence Still Significant Those numbers are quite low. Wonder what makes Ciena confident that they will make big profits here?
brooks7 5/5/2015 | 9:29:52 PM
Re: Ciena's Influence Still Significant mplape,

Go listen to the call on the Cyan Site.  Rod asks the question at around 17:15 and the quote I gave ends about 17:35 and it is quoted accurately on Seeking Alpha.  I listened to the call live so know that is what was said.  However, it is work to cut and paste audio and easy to quote a transcript. 

So please stop calling me a liar with an agenda.  I use the information given on the Conference Calls, Investor Presentations and other Public Information.  If that information is not accurate, don't blame the receivers.

seven

 
mplape 5/5/2015 | 6:38:56 PM
Re: Ciena's Influence Still Significant And Seeking Alpha is obvioulsy the gold standard of conference calls, they make more mistakes than siri.

What he said was 7 to 8 figures, and scaling up from there.

In any event, both deals being the same size when one carrier is a lot bigger would not make alot of sense. One would have hundreds or maybe thousands of elements and the other 10s of thousands. Which would obvioulsy generated more revenue.

I see some attempts to twist the audience toward a narrative that gives one the wrong impression.

 

mpalpe
brooks7 5/5/2015 | 6:22:53 PM
Re: Ciena's Influence Still Significant From the earnings call transcript on SeekingAlpha

"Rod, I think from the Blue Planet perspective, as our software gets deployed in the network, it will continue to grow and as it continues to grow, the revenue continues to grow as well. But for this year we think the initial deployments of those two wins are in the seven digit range. And we'll continue to grow thereafter as we add more applications and cover more network elements within the carrier space."

 

Emphasis mine.

seven
mplape 5/5/2015 | 6:14:54 PM
Re: Ciena's Influence Still Significant Seven,

Thanks for your insight. I think, if you go back and listen to the Q4 conf call in Feb., Mark Floyd said they won 2 Blue Planet Orchestraion deals, one with a tier 2 and another with a tier 1 (which we now know is CenturyLink). He said the smaller deal was 7 figures annually and the larger deal was 8 figures annually, and then scaling up over time as more elements and applications are added.

mplape
brooks7 5/5/2015 | 5:06:48 PM
Re: Ciena's Influence Still Significant "I think CenturyLink still stands as a benchmark for Cyan, given the scale and timing of its deployment plans."

I was quoting Cyan's CFO who said that Blue Planet would be a 7 figure revenue product on the CC last quarter.  On a $100M revenue company that is not a big number.

seven

 
cnwedit 5/5/2015 | 4:59:20 PM
Re: Ciena's Influence Still Significant Seven, 

I think CenturyLink still stands as a benchmark for Cyan, given the scale and timing of its deployment plans.

My point is that the Ciena acquisition takes Cyan's size out of the discussion. Blue Planet may or may not succeed as an orchestrator but the result won't be because of Cyan's size or lack of same. 

Carol
brooks7 5/5/2015 | 4:55:51 PM
Re: Ciena's Influence Still Significant Carol,

Century does not buy like one of the traditional Tier 1 firms because of their history.  Also, the implication from the comments on the call where that was announced was that the total for Blue Planet this year was single digit millions of $ in revenue.

seven

 
cnwedit 5/5/2015 | 3:06:50 PM
Ciena's Influence Still Significant The CenturyLink deal showed Cyan had overcome at least one Tier 1 provider's qualms about working with a smaller firm and the company might have gained significant momentum on its own. But the Ciena acquisition takes that issue off the table which could significantly speed BluePlanet adoption in the near term and encourage other operators to take a second look. 
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