Summary
1. Ciena is apparently writing off its entire debt as a result of the World Wide Packets pickup. 2. Last summer, we started to question AT&T’s actual assurance that it was going to buy the WWP solution. 3. The main reason for Ciena purchasing WWP was supposedly that the service provider was pushing for the acquisition.
Analysis
The very top leadership at Ciena evidently misread the signals coming from AT&T. It was hardly the first time there was such a miscalculation and it will likely not be the last.
In a June 3, 2008 article, in Compliance Week, Feng Gu, Assistant Accounting Professor,
State University of New York makes the following assertion: “Goodwill impairment writeoff is not a benign event. It represents the public acknowledgment of the failed nature of an acquisition.”
Ciena kind of snuck in the announcement on a Friday afternoon. It was successful in that it may be impossible to find any news article mentioning WWP debt as being written off (not that WWP was mentioned in the supplier’s press release). Industry analysts easily missed the significance of the development. And perhaps a few that are extra enthusiastic regarding Ciena, chose to simply ignore it.
It is so revealing that the very next Monday, Ciena issued a release on Ethernet solutions. Despite going 0 for 4 on major packet company acquisitions, the fixation on the technology will continue to persist, while its optical product line will remain its bread and butter.
