Tellabs, Ciena Agree to Call Off Deal

Tellabs Inc. on Monday ended its plan to acquire Ciena Corp., the top maker of equipment that boosts capacity on phone networks, citing changes in Ciena’s financial outlook.

Tellabs said its financial outlook has also dimmed, announcing that its third-quarter earnings and sales will fall short of estimates.

The Ciena deal, announced in June, began to unravel after Ciena warned of lower third-quarter earnings and failed to get two contracts it was expected to win, sending its stock down 70%.

The two companies agreed last month to cut the value of the proposed stock-swap deal by a third, to $4.7 billion. But on Monday, they agreed to dissolve the deal.

Tellabs said it remained interested in Ciena’s products, which increase the capacity of fiber optic networks, and it would consider a future alliance with Ciena.

“We walk away friends and indeed may well go back and talk about other possibilities in the future,” Tellabs’ Chief Executive Michael Birck said in a conference call.

Tellabs surprised analysts with its statement that revenue would be little improved from the previous quarter while earnings would be unchanged at 46 cents a share. Analysts were expecting 47 cents. A year earlier, Tellabs earned $64.2 million, or 34 cents a share, on sales of $309.4 million.

Shares in Tellabs had surged $7.38 to $52.38 on news that the Ciena deal was scrapped. But they fell $7.31 to close at $37.69 on heavy Nasdaq trading after the profit warning.

Ciena fell $2.75 to $13.19, also on Nasdaq. Its stock has fallen 85% from its July high.

Ciena reported a third-quarter profit of $16.1 million, or 15 cents a share, before one-time items, down 55% from a year earlier. Revenue rose 6% to $129.1 million.