Ciena Tests Capital Markets
Ciena today announced that it would file for a secondary stock offering of 8 million shares. In addition, the company will be offering $350 million in convertible senior notes due in 2008 (see Ciena Announces Share Sale).
The offering could bring the total amount of capital raised to about $1 billion.
The $1 billion dollar question is: Will they be able to sell all the shares, and the bonds, on the market? The offering will be a significant test of the capital markets and whether they're ready to deliver large amounts of financing to optical equipment providers.
Ciena currently has 288 million shares outstanding and the additional 8 million shares would represent a 2.8 percent dilution of its equity.
The deal is being underwritten by Goldman Sachs & Co. (NYSE: GS), Morgan Stanley Dean Witter, Banc of America Securities LLC and Robertson Stephens.
The offiering comes at an interesting time, with Nasdaq trading off of its one-year lows but still mired in a bear market mentality. But some analysts say the deal will get done.
"The capital markets are opening back up for quality names," says Rick Schafer, analyst at CIBC World Markets. Schafer says that Ciena is an established player with a balanced product portfolio and is arguably the number one OEO (Optical Electrical Optical) switch company. "It is number one in the metro space and top 3 in the transport market. It is the most well rounded company [in the optical systems market].”
The deal could be a prelude to the market's willingness to support large eqipment IPOs. Tellium Inc. has filed for an IPO and is likely waiting for the market to warm up(see Tough Seas for New IPOs).
Tellium makes the Aurora optical switch which competes with Ciena's Core Director. Some of its customers include Qwest Communications International Corp. (NYSE:Q), Cable and Wireless (NYSE: CWP).
The private market remains healthy for some companies in the sector, although valuations have been reduced. Large second and third rounds have recently been closed at companies like Calient and Caspian (see Calient Secures $225M 3rd Round and Optical VCs Grow Wary).
Steve Levy, analyst at Lehman Brothers, and Seth Spalding, analyst at Epoch Partners each said the offering should get done within two weeks.
-- Matt Malina, research associate, Light Reading http://www.lightreading.com