Ciena Shares Plunge on Missed Contract

Ciena Corp. shares plunged on news that the telecommunications-equipment maker failed to get a large contract from its customer Digital Teleport Inc., raising concern over whether Tellabs Inc. would complete its purchase of the company. But executives of both companies knew that Ciena wouldn’t win the contract at the time they renegotiated their merger agreement two weeks ago, people familiar with the agreement said after the close of trading. Linthicum, Md.-based Ciena fell $8.53, or 30%, to close at $19.75 on Nasdaq, after dropping as low as $18.25 earlier in the day, after DTI said it awarded the $240-million deal to Italian cable and tire company Pirelli. Tellabs rose $1.50 to close at $44.94, also on Nasdaq. Tellabs agreed to pay $7.1 billion in stock for Ciena on June 3. Since then, the value of the acquisition has dropped to about $4 billion, as Tellabs lowered the amount of stock it will swap for each Ciena share to 0.8 share from one share. The agreement now values Ciena at about $36 a share.