Ciena to Add Storage Service Provider to Arsenal

Network equipment maker Ciena Thursday said it has inked
a definitive agreement to acquire long-distance storage service provider
Akara Corp. in a deal totaling $45 million in stock and cash.

Linthicum, Md.’s, Ciena, which competes with the likes of fellow
infrastructure equipment makers Cisco , Lucent and Nortel , also announced third-quarter earnings
along with its purchase of Delaware-based Akara.

Akara specializes in offering Synchronous Optical Network/Synchronous
Digital Hierarchy (SONET/SDH) extended storage area networking (SAN), or
simply, long-distance services for enterprises and carriers.

A privately-held firm of 50 employees, Akara focuses on an emerging niche to
service companies who want to extend the range of their storage networks
with regard to establishing better business continuity and disaster recovery

The company’s goal is to string business continuance applications between
data centers with the lowest megabyte per mile cost across existing
metropolitan and wide-area networks. Akara relies on SONET/SDH, dark fiber
or DWDM networks to pare operational and capital costs for businesses.

The recent power outage, which blanketed much of the northeast in darkness
August 14, is one such event Akara’s SONET/SDH technology could prepare
enterprises for to enable them to get up and running without experiencing
data loss or much downtime.

SONET/SDH and optical fiber have emerged as popular technologies for
building large-scale, high-speed, Internet Protocol (IP)-based networks.
SONET/SDH’s capability to provide high-bandwidth capacity for transporting
data is the primary reason for ubiquitous use in the Internet and large
enterprise data networks.

One of the last
storage service providers, Akara will merge with a wholly-owned
subsidiary of Ciena and become part of its LightWorks portfolio to help
service providers create a automated, edge-to-core network. All remaining
outstanding shares of Akara stock will be exchanged for $45 million,
consisting of $31 million in cash and $14 million in shares of CIENA stock.

The number of CIENA shares to be issued will be determined based on the
average closing price of Ciena stock on the Nasdaq ten trading days
preceding the closing date. The transaction is expected to close during
Ciena’s fourth fiscal quarter 2003.

Ciena, one of the equipment providers to survive the dearth in IT equipment
spending by it major customers — carriers — over the last few years, also
reported its third quarter results.

The company reported revenues of $68.5 million, a boost of 37 percent from
the same period a year ago. Revenue for the nine months ending July 31 was
$212.5 million. Ciena’s net loss for the nine-month period was $271.5
million, or a net loss of 62 cents per share.

While the loss of 62 cents per share is glaring, it is less than it once
was. Once a major provider of optical equipment, the company had to evolve
and expand to survive, as CEO and President Gary Smith attested to in a
public statement announcing the earnings results.

“Ciena is a very different company than it was just a year ago, and we’re
not finished,” said Smith. “We have been taking deliberate steps to evolve
into a more comprehensive network solutions provider. “This transformation
is not an option. If Ciena is going to thrive in today’s telecom
environment, we must get bigger, not smaller. We continue to believe that we
cannot simply cost-cut our way back to sustainable profitability.”

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