Ciena in $400m Cyan acquisition to grow virtualization portfolio

Optical network infrastructure specialist Ciena has announced it has entered a definitive agreement to acquire Cyan Inc, a rival optical provider and software platform specialist. The terms of the agreement see an approximate $400 million value slapped on Cyan.

It appears that the optical market is entering a period of concerted consolidation, after Infinera – a rival of Ciena’s – last month announced it will be wholly acquiring Transmode. It appears that, with Infinera making aggressive moves to bolster its portfolio, Ciena is likely doing the same to flesh out its optical product line. More significant, perhaps, is the growing business Cyan has built around SDN and NFV.

Blue Planet is Cyan’s SDN-based service orchestration, automation and vendor management solution, which currently orchestrates the variety of network devices and codes of 15 different industry vendors. In December, Ciena announced its Agility division, intended to utilise SDN, NFV and other network virtualization initiatives in order to enhance service velocity, innovation and extract more business-oriented benefits out of the wide-area network (WAN).

At the time, the Ciena Agility general manager Kevin Sheehan reiterated the purpose of the division, saying: “The new Ciena Agility division is organised to quickly respond to the market demand for these customer-driven software solutions.”

It would be presumed, therefore, that Cyan’s orchestration expertise is an ideal acquisition for Ciena Agility, and would add a level of technical expertise and market success to the division. Ciena Agility’s Matrix portfolio of service delivery solutions is initially expected to launch at some point in the second calendar quarter of 2015.

“Ciena is transforming networks by applying web-scale technologies for delivering greater efficiency, network automation and agility while driving the industry toward an open ecosystem,” said Gary Smith, president and CEO of Ciena. “The addition of Cyan accelerates the availability of a complete solution for our customers to deliver virtualized networks and services on-demand.”

Cyan’s financial difficulties had been well documented in recent years, but the announcement of its Q1 financials saw a shot in the arm for the firm, with profits for the first quarter rising 89% year-on-year to $36 million, up from $19 million in Q1 2014. This also represents growth of 18% on the $30.5 million profit from Q4 2014.

Speaking on the forthcoming acquisition, Cyan’s chairman and CEO, Mark Floyd, said that integrating with Ciena will help Cyan achieve its business objectives more efficiently.

“After careful consideration and a comprehensive evaluation of strategic alternatives, our board of directors concluded that the opportunity to combine with Ciena represents the best possible outcome for shareholder value,” he said. “The transaction has many strategic merits and the stock consideration allows shareholders to participate in potential future combination benefits.  Our board of directors believes that being part of a larger, global platform enables the combined company to execute on Cyan’s business more effectively and provides significant value to our customers and shareholders.”

The deal, which has been approved by the board of directors for each firm, is still subject to other approvals from Cyan stakeholders and industry regulators in the US, and is expected to close during Ciena’s fiscal fourth quarter 2015, the third quarter of the calendar year.