Ciena Corp.'s stock price, which 16 months ago languished at $8, shot up 18 percent yesterday to an all-time high of $99 after the Linthicum-based telecommunications equipment provider announced a new contract and an analyst boosted his target price for the company.
Ciena said it signed an agreement with Irish telecommunications carrier Esat Telecom to provide 161 miles of fiber-optic lines between Dublin and London. Terms of the deal were not disclosed.
"This deployment is particularly important to Ciena," said Patrick Nettles, president and chief executive officer. "It represents further development of our European operations and a significant entry into the growing Irish market."
Brokerage firm SoundView Technology Group of Stamford, Conn., said yesterday that it expects Ciena's stock to hit $150 within the next 12 months. But SoundView analyst Kevin C. Slocum said his projection was not based on the Esat deal.
"I think it's a nice win, and they are continuing to grow their base of business, but it does not really change the story," he said. "It's more conceptually positive for the business than being material to how things are going right now."
In late 1998, analysts began to fear that Ciena was too dependent on two long-distance clients, then Sprint Corp. and WorldCom Inc., and would be unable to compete against larger, more diversified companies.
Its stock price went as low as $8.1875 in October 1998 after reaching $88.625 three months earlier. But Ciena returned to analysts' good graces after it began developing new products and expanding its customer base.
"The company began on the back of the largest carriers in the world," Slocum said, "When you see these smaller carriers who are coming into the Ciena customer ranks, it's encouraging because it's a real broadening of their market requirement and an acceptance of their technology."
Slocum said he also has "some knowledge" of a pending deal between Ciena and a major client.
"I believe a significant carrier has chosen to work with Ciena, and now the ball is in Ciena's court to perform and if they do well we will get a signing announcement," he said. "I raised the target, in part, because of that."
He said Ciena was likely keeping the deal under wraps until the product was delivered and up and running, in an effort to avoid a repeat of 1998, when AT & T Corp. announced it was stopping its test run of Ciena's equipment. That announcement derailed Ciena's planned merger with Tellabs Inc.
Ciena spokesman Aaron Graham said he could not comment on whether such a deal is in the works. There was speculation yesterday that Colorado-based Qwest Communications International Inc. was involved.
Ciena, which will report first-quarter earnings Thursday, had a net income of $4.5 million for the fourth quarter, ending Oct. 31. That compares with a loss of $7.1 million for the fourth quarter of the previous year. Sales were up 55 percent to $141.4 million.
For the year, Ciena posted a net loss of $3.9 million, compared with a net income of $45.7 million in 1998. Analysts, however, brushed off the loss, saying it was overshadowed by Ciena's momentum.