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Ciena to Boost Blue Planet's Strategy With Centina Buyout

Zacks Equity Research

Ciena Corporation CIEN said that it has inked an agreement to acquire Centina. The would-be acquiree is a privately-held leading provider of service assurance analytics and network performance management solutions. Financial terms of the deal remained undisclosed. The transaction, which is subject to customary closing conditions, is expected to close by the end of calendar year 2019.

Per the agreement, Centina’s technology and engineering expertise will be integrated into Blue Planet — a division of Ciena. The buyout is likely to boost Blue Planet’s software strategy of providing closed-loop, intelligent automation solutions that help communications service providers improve operational agility while delivering a highly differentiated customer experience.

Integrating Centina’s robust service assurance capabilities with Blue Planet Multi-Domain Service Orchestration and Blue Planet Inventory will allow continuous optimization of service performance, quality and availability.

The acquisition of Centina advances Blue Planet’s position as an emerging leader in operational support systems. Its multi-domain service assurance solution will help Blue Planet’s customers resolve issues more quickly and optimize network performance.

Ciena’s revenues are expected to increase from the rising demand for packet-optical transport and switching products, integrated network and service management software. The company has been diversifying its footprint in data-center connectivity. This has enhanced its reach into a broader end-to-end optical and data-equipment market. It is increasingly investing in the data and optical fiber market to cash in on the tremendous growth opportunity presented by rising bandwidth demand from network service providers.

In the last earnings report, Ciena’s total revenues increased 17.3% year over year to $960.6 million, primarily driven by higher product sales. It had two 10%-plus customers in the quarter, which represented 25% of revenues.

Geographically, revenues from North America were $617 million, up 24.1% year over year, driven by additional share gains across diverse customer base, including new wins and increasing traction of packet and software portfolios. Revenues from Europe, Middle East and Africa were $169.5 million, up 38.7%. Caribbean and Latin America totaled $39.3 million, up 42.9%. Asia Pacific revenues were $134.8 million, down 21.7%.

Ciena has long-term earnings growth expectation of 17.3%. The stock has added 10.6% compared with the industry’s growth of 8.9% year to date. The company topped earnings estimates in each of the trailing four quarters, delivering an average surprise of 15.7%.

Ciena currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader industry are PCTEL, Inc. PCTI, Viasat, Inc. VSAT and T-Mobile US, Inc. TMUS. While PCTEL sports a Zacks Rank #1 (Strong Buy), Viasat and T-Mobile carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTEL surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 146.4%.

Viasat surpassed earnings estimates in each of the trailing four quarters, the average surprise being 230.6%.

T-Mobile surpassed earnings estimates in each of the trailing four quarters, the average surprise being 17.9%.

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