Shareholders of telecom equipment maker Ciena (NASDAQ:CIEN, news, filings) have sure had quite a ride recently. The most recent news of course was an eruption of buyout rumors. Supposedly, it was Nokia Siemens that was sniffing around, fresh from losing the Nortel MEN auction. Nokia Siemens flat out denied it, but the rumor kept right on trucking without an actual named buyer like some sort of headless horseman.
Is it completely out of the question? No of course not. But in both strategic and tactical terms it makes no sense. The other opportunistic buyers out there are busy tucking in to sections of Nortel already. After all, more than half of Ciena will be Nortel’s MEN, and if someone else really wanted it this bad they would have bid higher in the auction. If they wanted the Ciena portion there have been other opportunities. Waiting until now and buying both would turn what is already a tough integration problem into a three-sided integration nightmare – no matter who the buyer might be.
For Ciena’s part, their valuation is lower right now because they have taken on the risk of the Nortel integration. A buyout now would be the culmination of one heck of a plan. First you wait for a major recession. Just before things start really turning around, you scare the markets by buying a distressed asset bigger than you are. Then before even attempting to prove you have made the right move you put yourself up for sale? Maybe Machiavelli could make something out of that, but I sure can’t.
No, this smells like another rumor that was born in the trading pits and will die there as well.
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