, a maker of telecommunications equipment, soared to an all-time high Monday after the company announced it had won a contract to supply
The state-run company will use Ciena's systems in seven South Korean cities, including Seoul, the company said. Ciena did not disclose financial terms of the deal. Its shares gained $14.50, or 12.01%, to $135.25 in late morning trading.
Ciena, which develops and manufactures products to increase the capacity of telephone and data networks, said the deal positions it for additional expansion in Asia. Ciena said Korea Telecom chose its systems after testing gear from four other vendors. Korea Telecom plans to use Ciena's MultiWave Metro fiber-optic system, which allows several signals to be transmitted simultaneously across one channel.
Paul Silverstein, an analyst for
, said the contract marks a significant victory in one of three new business segments Ciena has entered. The MultiWave Metro product competes in a business that is currently worth no more than $150 million, he said, though he added that the business seems poised for rapid expansion. (Silverstein rates the company's shares a buy, and his firm has done no underwriting for the company.)
Based in Linthicum, Md., Ciena competes with specialized companies like
as well as giants like
. Silverstein said he expects 20% annual growth in telecommunications equipment, and 100% growth in optical networking gear.
On the strength of the announcement, the company's shares reached $136.25, an all-time high. The company has rebuilt itself since a series of disasters in 1998 cost the stock much of its value.
In June of that year,
, another telecommunications equipment company, announced its intention to purchase Ciena for $7.1 billion. But soon thereafter, Ciena lost some large contracts and profitability slipped.
The merger price was renegotiated to $4 billion, but Tellabs later decided to call off the deal altogether. Ciena's shares fell to below $10 at the end of 1998.
At one time, the company dominated the market for so-called wave-division multiplexing equipment, which divides light beams on fiber-optic cables to boost transmission capacity. But similar products from
won significant market share.
With the equipment it is selling in South Korea, Ciena appears to believe it has established a beachhead. The gear will enable Korea Telecom to deliver gigabit ethernet traffic, industry jargon referring to a years-old protocol for local access networks combined with a high data transfer rate.
In Asia, "there's a long way to go in terms of bandwidth and connectivity," Silverstein said. The contract "should make Ciena's next sale in the region that much easier."