Telecomms equipment maker Ciena has confirmed that its proposed $7 billion merger deal with Tellabs has fallen through.
The news coincides with a 55 per cent slide in its third quarter income, on revenue that increased by six per cent. Ciena said the figures were in line with expectations, after it issued a profit warning last month.
Ciena found success developing optical networking technology for carriers, called dense wavelength division multiplexing (DWDM), which enables telcos to build high capacity IP backbones. Cable and Wireless Communications is a customer. However, things began to go downhill when it announced its profits warning and confirmed it had lost AT&T as a customer for its key technology.
Last April, Ciena said it would merge with fellow telecomms equipment vendor, Tellabs, to compete with giants Lucent and Nortel. However, according to a Ciena statement: "The companies believe that investor reaction to events of the last several weeks raised serious questions about the ultimate ability to obtain shareholder approval for the merger."
Bosses also warned things would not improve by the fourth quarter. Said Patrick Nettles, Ciena president and chief executive: "Feedback received from our salesforce indicates that the uncertainty created by the events of the last few weeks and attempts by our competitors to capitalise on that uncertainty may delay or alter some customers' near term purchase decisions. As a result we believe fiscal fourth quarter revenues and operating results will be materially below those reported in the third quarter."
For the third quarter, net income was $16.1 million, on revenue of $129.1 million. The figures are exclusive of one-time charges related to Ciena's previously announced settlement with Pirelli, and costs related to the proposed Tellabs merger.
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