Ciena Corp. to buy ONI Systems for 15.08 times revenue

The Deal: Ciena Corporation has agreed to purchase ONI Systems Corporation in a stock deal valued at $900 million, or $6.20 per share. Ciena will also assume over $300 million in debt. Boards of both companies have approved the transaction, which is expected to close by the end of the year, pending

Discussion: ONI Systems, formerly known as Optical Networks, makes fiber-optic communications equipment that allows networks to add services without sacrificing speed.

Ciena Corp. makes multiplexing systems that increase the capacity of long-distance fiber-optic telecommunications networks. The company is is the nation's second-largest producer of fiber-optic networking equipment and also sells network management software. Sprint and Qwest together account for about half of Ciena's sales.

Both companies have suffered from recent decreases in telecommunications equipment spending. "It was quite a party in 1999 and 2000. Now there's quite a hangover," Ciena President and Chief Executive Gary Smith said in an interview. Ciena expects to save $55 million to $65 million per year as a result of the merger.