CIENA (NASDAQ: CIEN), a company that produces networking gear, has seen nearly a 10% rise in its share prices after AT&T (NYSE: T) announced Velocity IP – its plans to spend $14 billion in the next three years to increase its broadband and wireless networks. AT&T will be improving rural infrastructure and spreading the network over a larger geographical area in the US. AT&T has also decided to increase spend on the Long Term Evolution (LTE). Not only will CIENA benefit from the purchases that AT&T makes, CIENA is also likely to increase sales if other carriers decide to spend on their networks to keep up with AT&T. CIENA is one of a group of network equipment companies that have seen an increase in share prices on the positive news of AT&T’s increased spending and investment.
AT&T intends to spend $8 billion on wireless infrastructure and $6 billion on wire lines. AT&T will be broadening the geographical reach of its network. The plan includes an upgrade of AT&T’s rural lines and will involve increased infrastructure spend over the next three years. AT&T’s plans also include an expansion of the high-speed wireless network that is based on the LTE standard to cover 300 million people by the end of 2014. AT&T will be increasing investments in networks to offer better service and remain profitable. AT&T’s rivals too will be under pressure to follow suit and increase expenditure on network infrastructure, providing a further boost to network equipment companies.
CIENA provides communication networking equipment, software and services that facilitate the transport, switching, aggregation and management of voice, data and video traffic. CIENA provides packet-optical transport, carrier Ethernet service delivery and packet-optical switching to communication services providers, governments and cable operators all over the world.
CIENA’s packet-optical transport unit offers scalable solutions that are useful in places where space and power are critical. The packet-optical switching equipment can be deployed in many situations such as scalable optical cross connect and a fully converged packet optical transport and switching systems. The carrier Ethernet service delivery systems offer better functionality in metro areas. The higher bandwidth offered, as well as the variety of solutions available, will enable CIENA to meet the network infrastructure needs of major carriers.
AT&T’s announcement has spurred investor interest in CIENA. Share prices of CIENA saw an increase of 0.4% to close at $14.50 on Thursday on heavy trading of 7.8 million shares. Other telecom and technology companies did not fare as well as CIENA on Thursday. Procera Networks (NASDAQ: PKT) saw a loss of 3.7% to close at $22.39, and Telular (NASDAQ: WRLS) dropped 1.8% to $10.50.