Ciena Corp. announced yesterday that AT&T; Corp. has begun deploying its fiber-optic network in Los Angeles and plans to use the same system in several of the telephone giant's 71 major markets around the country.
Wall Street reacted kindly to the news. Shares of Ciena touched as high as $66.73 before closing at $64.30, up $3.51, on the Nasdaq stock market.
The AT&T; deal marks a turnaround from nearly three years ago, when the company said it would not be a Ciena customer - a move that helped scuttle a $7 billion offer by Tellabs Inc. to acquire the Linthicum maker of fiber-optics equipment.
"This is three years of perseverance to get back into that account," said Denny Bilter, senior director of marketing for Ciena.
AT&T; is buying a Ciena fiber-optic network designed for cities that uses hair-thin fibers to carry voice, video and other data.
The exact number of AT&T;'s markets where Ciena equipment will be used has not been determined, according to Ciena. But the deal is a multiyear agreement with no limitations on how much Ciena equipment AT&T; can buy.
"AT&T; is considered one of the tier-one customers for the equipment providers. It's like a trophy customer for them," said Prospero Roda, an analyst for Global Capital Securities in Baltimore.
AT&T; had been the only major carrier not to use its products, Ciena officials said. Ciena's other tier-one customers include Sprint Corp., Verizon Communications Inc., WorldCom Inc. and Qwest Communications International Inc.
"Generally, Ciena has come to the market with a very fine technological product, and I think AT&T; has finally moved on beyond some of the past relationship issues that they had years ago," said Jim Jung- johann, an analyst for CIBC World Markets.
Ciena had announced June 3, 1998, that Tellabs would buy it in a stock swap initially valued at about $7 billion. But a flurry of bad news followed, including AT&T;'s August announcement that it would not buy equipment from Ciena, as the Linthicum company had hoped. The deal with Tellabs was called off a month later.
Dave Johnson, an AT&T; spokesman, said that this time around the company chose Ciena because its equipment tested well in AT&T; laboratories.
"Whatever may or may not have happened in 1998 is sort of almost immaterial to what we're doing right now," Johnson said. "Three years ago for our business is ancient history."
Jungjohann said AT&T;'s business is a step in the door for Ciena, adding that "getting in is everything" and that the deal could turn into something "quite meaningful" down the road.
Bilter of Ciena called the contract a validation of Ciena's products.
Much has changed for Ciena since the AT&T; deal fell through. Ciena's work force and infrastructure are now global, and it has a complete portfolio of products.
"We're just really pleased to be into their network," Bilter said. "It's something that we've worked long and hard to get into."