Do the deal

Recent snags in the planned union of Tellabs and Ciena point to precisely why the merger is necessary for both parties-and why it would be a technological misstep for Tellabs not to show up at the altar.

The hiccups in an otherwise happy courtship began when Ciena announced that AT&T would not consider the vendor's 40-channel dense wavelength division multiplexing system. The revelation caused Ciena's stock price to plummet and led the boards of both companies to postpone their shareholder votes on the merger until Sept. 9.

Some say the deal will not get done. Others say it will but that Tellabs will seek more favorable terms based on the implications of not being able to bank on AT&T as a DWDM customer. Some more optimistic observers say the market overreacted and will reconsider its reaction by Sept. 9, paving the way for the merger togo through under the original terms.

The fact that the network equipment choices of one company-one, in fact, that never even tested Ciena's 40-channel product-could threaten to bring down such a well-constructed deal points to exactly why vendor consolidation and product diversification is so crucial in this industry.

In brokering the deal, both Tellabs and Ciena had the foresight to recognize their respective shortcomings. Ciena knew its customer base was slim and that something like this AT&T scenario would occur without the support of an entity like Tellabs. Tellabs recognized the value of Ciena's technology-and the jump the vendor had on its competition-and knew Ciena's holdings would be an asset to Tellabs' customer and product bases.

Both companies are strong suppliers in their own rights, but both realized how much their futures hinge on broadening their relatively narrow focuses.

Ciena, not surprisingly, still wants to dance. Tellabs needs to recognize that DWDM opportunities do not stop at AT&T-or with any other long-haul carrier, for that matter. Ciena has already made inroads in adapting its technology for metropolitan and short-haul networks. Tellabs would be wise to extrapolate that a company that was as successful as Ciena in a nascent technology area is likely to put in a repeat performance.

The timing of AT&T's news is unfortunate and inexplicable, particularly given Ciena's record. But it shouldn't change anyone's mind about why Tellabs and Ciena need each other-in fact, it should clarify exactly why they do.