Ciena To Acquire Cyras

In the continuing quest to improve the fundamental economics of building and operating service provider networks, CIENA Corporation (NASDAQ: CIEN) and Cyras Systems, Inc. today announced that CIENA has agreed to acquire privately held Cyras in exchange for 27 million shares of CIENA common stock. Cyras, based in Fremont, Calif., is developing data-optimized optical switching systems for metropolitan area network applications.

"A natural extension of CIENA's industry-leading CoreDirector* product family, Cyras' high-capacity, data-optimized next-generation SONET transport and switching platform will deliver the economic benefits of optical networking further toward the edge of service provider networks than ever before," said Scott Clavenna, president of PointEast Research.

Clavenna continued, "This combination is compelling. Cyras brings a new element to CIENA's LightWorks architecture story and expands CIENA's footprint at the edge of the network, while CIENA brings its existing significant presence in metropolitan optical transport networks, meaningful customer relationships, an established sales channel and global service and support capabilities."

Transaction Terms

Under the terms of the agreement with Cyras, CIENA will acquire all outstanding shares of Cyras in exchange for 27 million shares of CIENA common stock. CIENA also assumes $150 million of Cyras' outstanding convertible debt. Based on the closing price of CIENA stock on December 18, 2000, the deal is valued at approximately $2.6 billion.

CIENA intends to account for the transaction as a purchase and expects the transaction to qualify as a tax-free reorganization. CIENA expects the transaction will become accretive on a pro forma basis, during the latter half of the Company's fiscal year 2002, assuming expected revenue and cost synergies, as well as anticipated product pricing.

Prior to this announcement, the consensus of First Call estimates for CIENA's fiscal year 2001 was $0.70. Assuming successful completion of this transaction in the first calendar quarter of 2001, CIENA expects the transaction to be dilutive to expected 2001 pro forma earnings per share by $0.19 to $0.22, excluding one-time charges associated with the acquisition as well as amortization of intangibles and deferred stock compensation costs.

The Board of Directors of CIENA and Cyras each have unanimously approved the transaction. Subject to regulatory approvals and customary closing conditions, CIENA expects this transaction to close in the first calendar quarter of 2001. Morgan Stanley served as financial advisor to CIENA on this transaction.

Extending CIENA's Network Presence

"Cyras complements CIENA's existing product set by extending CIENA's reach from the core of the service provider network to the metropolitan access and switching networks," said Patrick Nettles, CIENA's chairman and CEO. "With the addition of the Cyras' K2 Trans-Metro Optical platform, CIENA believes it will be able to enhance our strategic position as a pure-play next-generation equipment provider and expand our addressable market opportunities in the high-growth metropolitan area markets."

CIENA's CoreDirector and CoreDirector CI are intelligent optical switches targeting the core of service provider networks. The addition of Cyras' K2* -- Trans-Metro Optical (TMO) platform to CIENA's CoreDirector family of intelligent optical switches should provide CIENA with comprehensive, synergistic, end-to-end capabilities for the creation and management of customized services with unmatched scalability, agility and efficiency. Cyras' K2 is designed to deliver advanced provisioning and transport functions to service provider's existing metropolitan networks enabling carriers to adapt to rapidly changing, demanding and complex mixed-traffic environments.

"Through continued innovation, CIENA's been able to change the fundamental economics of building service provider networks, making the core networks simpler and therefore less costly to build and operate," said Alnoor Shivji, Cyras founder, CEO and president. "Cyras' applied the same philosophy to metropolitan area networks and we believe the combination of our efforts will offer carriers a compelling alternative to legacy approaches."

Cyras' K2 Trans-Metro Optical Platform

Cyras' K2 Trans-Metro Optical Platform is a data-optimized SONET transport and switching platform that is designed to incorporate the functionality of digital cross-connects, SONET Add/Drop Multiplexers, ATM service access multiplexers and switches, Frame Relay access switches, DSLAMs, DWDM wavelength adapters and MPLS switches in a single network element. By collapsing the functions of many discrete platforms into one compact switch chassis with interchangeable line cards, Cyras estimates carriers can realize an immediate 10 to 40-fold increase in price/bandwidth efficiencies over current legacy network solutions.

"The K2 was the most impressive metro product I evaluated in 2000," said PointEast Research's Clavenna. "It offers a combination of scalability from OC-768 to VT1.5 service granularity, while providing metro operators with a platform that can be deployed as a low-cost edge switch with extensive circuit and data handling capabilities."

Cyras has shipped its K2 platform to four customers for trial thus far. Commercial availability of the product is expected in the first half of calendar 2001.

Organization

Following completion of the transaction, Cyras will form a new CIENA division focusing on multi-service access and switching, and all employees of Cyras will become employees of CIENA. Alnoor Shivji, Cyras founder, CEO and president will report to CIENA President and COO, Gary Smith. The sales efforts of both companies will be combined in to CIENA's existing sales organization.

http://www.ciena.com/news/archive/2000/12/12.19.2000.html