Ciena to Acquire Packet Design to Boost Software Strategy

Ciena Corporation CIEN recently inked a definitive agreement to acquire Packet Design, LLC. The financial terms of the deal, however, remained undisclosed.

Based in Palo Alto, CA, privately-held Packet Design provides network performance management software focused on Layer 3 network optimization, topology and route analytics. It develops performance analytics technology solutions for network operators, enterprises and government agencies.

The transaction is expected to close during the third quarter of fiscal 2018 and is subject to customary closing conditions.

Rationale Behind the Move

The acquisition of Packet Design is likely to accelerate Ciena’s software strategy and contribute toward its long-term financial goal of growing its Blue Planet and associated services business by approximately 14-16% annually over the next three years. The expansion of Blue Planet software business and network automation capabilities will provide the company competitive differentiation and improve profitability.

The buyout will help accelerate Ciena's software strategy by extending its intelligent automation capabilities into Layer 3, with critical new features to support a broader range of closed-loop automation and optimization use cases across multilayer multivendor networks.

The addition of Packet Design is expected to boost Ciena’s position in the industry by enabling customers to realize networks that are more adaptive, capable of self-optimizing and self-healing for faster time-to-market while delivering an overall better customer experience.

Also, Packet Design's IP experts are world-class and the combination with Blue Planet will give Ciena a definitive advantage in software-based network automation. The collaboration will form a unique, micro-services-based platform that would deliver real-time analytics and optimization.

Price Performance

Over the past six months, shares of Ciena have outperformed the industry with an average return of 12.1% compared with 10.4% growth for the latter. The company has healthy growth prospects in the international markets. It has a strong presence in Asia Pacific, especially India.

Zacks Rank & Other Stocks to Consider

Ciena currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader industry include BlackBerry Limited BB, Motorola Solutions, Inc. MSI and Ubiquiti Networks, Inc. UBNT. While BlackBerry sports a Zacks Rank #1 (Strong Buy), Motorola Solutions and Ubiquiti Networks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackBerry has an expected long-term earnings growth rate of 18.6%. It exceeded earnings estimates twice in the trailing four quarters, with an average of positive surprise of 500%.   

Motorola Solutions has an expected long-term earnings growth rate of 8%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.   

Ubiquiti Networks has an expected long-term earnings growth rate of 18.6%. It exceeded earnings estimates thrice in the trailing four quarters, with an average of positive surprise of 8.9%.    

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