TECH TALK
By Paul Motter (TMF DotCom)

NEW YORK, NY (July 9, 1997) -- In the last couple months we have witnessed the meteoric rise of a new company called CIENA CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %>.

This company's specialty is a new technology that expands the capacity of fiber-optic cable by combining several different carrier frequencies into one signal, effectively multiplying the capacity of the cable. The process is called multiplexing.

In standard data-communications nomenclature there are two kinds of multiplexing. Time division muliplexing (TDM) involves sampling several binary digital signals at a fast enough rate to combine them into a composite digital signal consisting of a bit from signal 1, then a bit from signal 2, then a bit from signal 3, etc. until a composite of several channels is combined into one signal. The signal is de-multiplexed at the other end.

There is also frequency division multiplexing (FDM), which uses analog signals. With analog signalling carrying digital information over analog carrier frequencies, it is possible to send one channel at one modulated frequency, another channel at another modulated frequency, and so on. By combining the analog signals into one complex analog signal comprised of many frequencies, it is possible to multiplex by carrying several channels simultaneously.

CIENA does wave division multiplexing (WDM). It divides the full color spectrum of light normally carried by fiber optic cable into different colors represented by their individual wavelengths. One digital signal can be carried on one modulated wavelength of light while another signal can be carried on another wavelength.

By using wave division multiplexing to carry information rather than the time division multiplexing normally employed by fiber-optic technologies (which has problems such as dispersion management, higher optical power requirements, low granularity for add/drop applications and maintenance issues), CIENA claims to be able to carry more information farther than traditon fiber-optic systems. The capacity can be increased 16-fold for existing fiber-optic installations by adding CIENA's WDM equipment and expensive repeaters and dispersion managers can be eliminated. It is possible to upgrade fiber originally created for OC-48 speeds to OC-192 without changing the existing cable infrastructure.

CIENA's customers include Sprint and WorldCom, two heavy hitters in the world of high speed international Internetworks. Cable and Wireless and AT&T are investigating the possibilities. On May 22, CIENA announced results of operations for its second fiscal quarter ended April 30, 1997. Revenues for the quarter were $86.7 million, and gross profit was $54.7 million. Operating expenses were $11.3 million, resulting in income from operations of $43.4 million. Net income was $27.6 million, or, on a pro forma basis, $0.26 per share.

For the comparable quarter ended April 30, 1996, the company had no revenue, operating expenses of $3 million, and a net loss of $2.7 million, or, on a pro forma basis, a net loss of $0.03 per share.

Qwest

One possible customer for CIENA in the near future may be Denver-based QWEST COMMUNICATIONS INTL. INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %>. It is building a complete SONET based fiber-optic network set to extend approximately 13,000 route miles coast-to-coast, connecting 92 metropolitan areas. The network will capable of carrying voice, video and data applications.

Qwest went public June 24 with 13.5 million shares of common stock at $22 per share. The company plans to use proceeds of the offering to fund the construction of its fiber optic network. The stock jumped $28 in heavy trading, with nearly 4.5 million shares traded early in the session. Today the stock closed at $28 1/4.

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