Ciena provides network operators with equipment, software and services for the transport, switching, aggregation and management of voice, video and data traffic on communications networks.
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$12.33||-17.1%||—||1.1%|
|BV including aggregate dividends||-17.1%||—||1.1%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
During March 1999, CIENA completed a merger with Lightera, a Delaware Corporation headquartered in Cupertino, California, in a transaction valued at approximately $463.5 million. Lightera is a developer of carrier class optical core switches for fiberoptic communications networks. Under the terms of the merger agreement with Lightera, CIENA acquired all of the outstanding shares of Lightera in exchange for approximately 17.5 million shares of CIENA common stock. In connection with the transaction CIENA also assumed outstanding stock options and warrants which represent rights to acquire an additional 3.1 million of CIENA stock.
On July 1, 1999, the Company completed a merger with Omnia in a transaction valued at approximately $483 million. Omnia is a telecommunications equipment supplier which focuses on developing solutions to allow public telephone network operators to offer services cost effectively over integrated metropolitan fiberoptic access and transport networks. Under the terms of the merger, the Company acquired all of the outstanding shares and assumed the stock options of Omnia in exchange for approximately 15.2 million shares of CIENA common stock and 0.8 million CIENA shares issuable upon exercise of stock options. The transaction constituted a tax-free reorganization and has been accounted for as a pooling of interests
On March 29, 2001, CIENA acquired all of the outstanding capital stock, and assumed the options and warrants of Cyras Systems, Inc., a privately held provider of next-generation optical networking systems based in Fremont, California. The purchase price was approximately $2.2 billion and consisted of the issuance of approximately 26.1 million shares of CIENA common stock, the assumption of approximately 1.9 million stock options and the indirect assumption of $150 million principal amount of Cyrass convertible subordinated indebtedness. Cyras is designing and developing next-generation optical networking solutions for telecommunications carriers. The Cyras K2 product, which has become CIENAs MetroDirector K2, will enable carriers of metropolitan area networks to consolidate multiple legacy network elements into a single switching platform.
The Company recorded a charge of $1.7 billion to reduce goodwill during the fourth quarter of 2001 based on the amount by which the carrying amount of these assets exceeded their fair value. The write down is related to the goodwill associated with the Cyras transaction.
On February 18, 2002, CIENA announced that it had entered into an agreement to acquire by merger ONI Systems Corp. ("ONI"), a NASDAQ-listed corporation headquartered in San Jose, California. ONI is a provider of optical networking equipment specifically designed to address bandwidth and service limitations of regional and metropolitan networks. Under the terms of the agreement, each outstanding share of capital stock of ONI was exchanged for 0.7104 shares of CIENA common stock, and CIENA assumed all ONI outstanding options and warrants as well as the ONI outstanding convertible debt. The acquisition was consummated on June 21, 2002. The stockholders of ONI received 101,120,724 shares of CIENA common stock of which 1,039,429 are restricted and subject to repurchase. Additionally, CIENA converted approximately 18,193,345 ONI options and warrants into 12,924,552 options and warrants to purchase CIENA common stock. The aggregate purchase price was $978.2 million
On May 3, 2004, CIENA completed the acquisitions of Catena Networks, Inc. and Internet Photonics, Inc. Internet Photonics' product lines will be incorporated into MESG, and Catena's product lines will form a new operating segment, the Broadband Access Group (BBG). Under the terms of the agreement to acquire Catena, all the outstanding shares of Catena common stock, preferred stock and outstanding stock options and warrants were exchanged for 75.9 million shares of CIENA common stock. The Company expects to record an aggregate purchase price of approximately $466.1 million for Catena. The purchase price for this acquisition was based on the average closing price of CIENA's common stock for two trading days prior to, the date of, and the two trading days after the February 19, 2004 announcement. Under the terms of the agreement to acquire Internet Photonics, all the outstanding shares of Internet Photonics common stock, preferred stock and outstanding stock options and warrants were exchanged for 24.1 million shares of CIENA common stock. The Company expects to record an aggregate purchase price of approximately $148.2 million for Internet Photonics. The purchase price for this acquisition was based on the average closing price of CIENA's common stock for two trading days prior to, the date of, and the two trading days after the February 19, 2004 announcement.
On March 19, 2010, Ciena completed its acquisition of the MEN Business. Ciena believes that this transaction strengthens its position as a leader in next-generation, converged optical Ethernet networking and will accelerate the execution of its corporate and research and development strategies. Ciena believes that the additional geographic reach, expanded customer relationships, and broader portfolio of complementary network solutions derived from the acquisition will augment and accelerate the growth of its business. The $773.8 million aggregate purchase price for the acquisition consisted entirely of cash.
On May 3, 2015, Ciena entered into a definitive merger agreement to acquire Cyan, Inc., a Delaware corporation and leading provider of SDN, NFV and metro packet-optical solutions, in a cash and stock transaction. Subject to the terms and conditions set forth in the merger agreement, at closing each outstanding Cyan share will be exchanged for consideration equal to the value of 0.224 shares of Ciena common stock, 89% of which will be delivered in Ciena common stock and 11% will be delivered in cash based on the value of Ciena common stock at closing. Ciena also will assume Cyan's outstanding convertible notes, subject to certain conversion and repurchase rights of the holders triggered by the acquisition, as well as Cyan's outstanding equity awards. At the time of signing of the merger agreement, the transaction was valued at approximately $400.0 million (or $335.0 million, net of estimated cash acquired) and inclusive of Cyan's $50 million outstanding convertible notes on an as-converted basis.