Ciena Corp. has agreed to acquire privately held Cyras Systems, Inc. in exchange for 27 million shares of Ciena common stock. Cyras, based in Fremont, CA, is developing data-optimized optical switching systems for metropolitan area network applications.
Under the terms of the agreement, 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. The company also expects the transaction will become accretive on a pro forma basis, during the latter half of its 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.
Cyras' K2 Trans-Metro Optical Platform is a data-optimized SONET transport and switching platform that is designed to incorporate the functionality of digital crossconnects, 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.
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.
"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."
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.