Still Sell Ciena

Also: analysts' opinions on Dynegy and ChevronTexaco

Ciena (CIEN ) Maintain 1 STAR (sell)

Analyst: Ari Bensinger

The company sees EPS for its October quarter of $0.04-$0.06 on sales down 20% from the July quarter. While the range is above the consensus estimate of $0.04, results were still sharply lower than the $0.17 EPS in the previous quarter. Ciena also says it will consolidate facilities and cut its workforce by 10%. S&P views the restructuring as a clear signal of weaker operating outlook. The company is not offering guidance for full fiscal 2002. Meanwhile, the impact of a spending halt by Qwest, which provides about 20% of Ciena's sales, will be felt in the January quarter. S&P sees downside risk to our recently lowered fiscal 2002 EPS estimate of $0.29. Ciena looks unattractive at 66 times estimates and 4 times fiscal year 2002 sales forecast.

Dynegy (DYN ): Maintains 5 STARS (buy)

Analyst: Stephen Biggar

Dynegy agrees to acquire Enron (ENE ) for 0.2685 shares of its common stock, or about $7 billion. Analyst's initial impressions of the deal are positive, as the pact is expected to be highly accretive to Dynegy in the first year. An immediate infusion of $1.5 billion by ChevronTexaco to maintain Enron's trading operations, and rumored investments by JP Morgan Chase and Citigroup also lend credence to the deal. The company will provide more details after an analyst conference.

ChevronTexaco (CVX ) Maintains 5 STARS (buy)

Analyst: Tina Vital

As Dynegy agrees to buy Enron with some of ChevronTexaco cash, shares of ChevronTexaco are up 2.7% over the last week on rumors of the Dynegy-Enron merger, which was finally announced on Friday. In support of the deal, the company committed $2.5 billion of new equity in Dynegy at a significant discount to Friday's close -- immediately, $1.5 billion convertible preferred shares (CPS); upon closing, $1.0 billion common shares. ChevronTexaco holds 26% interest in Dynegy, holds three employees on Dyngegy's board. If the deal fails, it can redeem CPS for cash or convert to Dynegy common stock.

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