Networking companies in Silicon Valley are continuing their programme of consolidation with San Jose's ONI Systems, once one of the Valley's fastest growing companies, which was acquired by networking equipment maker Ciena for $1.2bn.
Analysts predicted that the economic slowdown would prompt smaller networking equipment companies to sell out to larger ones while the industry waits for its customers - the telephone and internet companies - to start spending again.
Ciena is a long-haul fibre-optic network manufacture and the deal gives it the capacity for metropolitan networks, one of the few sectors where analysts expect spending to rise in 2002. The deal also makes it a stronger rival to Nortel.
ONI was valued at $10.9bn in its June 2000 initial public offering, and was the fastest growing of Silicon Valley's 150 largest public companies that year.
But when telephone companies and internet service providers slashed spending for long-haul networks last year, ONI's market plummeted.
In October, the company announced 16 per cent job cuts and its chief executive officer Hugh Martin hit the headlines by cutting his salary to $1. The company lost $34.7m on $42.2m in revenue in the fourth quarter.
Martin said that he did not see the sale as selling out, even though he is leaving the company.
"ONI might have survived on its own, but the stakes were too high to risk finding out," he explained. "I just don't think we can risk losing this opportunity."
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