Shares of Ciena Corp. slipped yesterday as Wall Street reacted to news that AT&T; Corp. has decided to stop its tests of Ciena's equipment.

The stock of Linthicum-based Ciena closed at $79.375, down $1.0625. Earlier in the day, shares were as low as $74.75.

Ciena, which is being bought by Tellabs Inc., makes gear that turns one communications channel into many, greatly expanding phone network's capacity.

AT&T; had been testing Ciena equipment that turns one channel into 16, but according to a filing Tellabs made with the Securities and Exchange Commission, AT&T;'s capacity needs have grown so much that the huge long distance company is shifting to higher-capacity systems.

That has led AT&T; to stop testing Ciena's 16-channel system, but AT&T; has not dealt a similar blow to its other vendor of the equipment, Lucent Technologies Inc.

"There's no halt of the testing of our 16-channel systems in their lab," said Lucent spokeswoman Loren Talley.

Lucent, which was part of AT&T; before it spun off to become a separate company in 1996, made a strong showing in yesterday's trading, its shares rising $6.25 to close at $95.25.

The battle between Ciena and Lucent for AT&T;'s business will now shift to the high-capacity market. AT&T; had indicated in January that it planned to test a Lucent device that could turn one channel into 80. Lucent has promised that device by year's end.

Ciena has a 40-channel product on the market and plans to upgrade the device to 96 channels this year. Lucent does not have a product that can handle 40 or more channels.

Ciena spokesman Denny Bilter said he expects AT&T; to test Ciena's 40-channel product but does not know when it might do so. "We are still positive and optimistic about our opportunity with AT&T;," he said.

Bilter did not specify when AT&T; notified Ciena of its decision but said it was in the past month.

AT&T; declined to comment on its relationship with Ciena.

Pub Date: 7/31/98