Cyan to stay in Petaluma after Ciena acquisition

After a career of starting up companies, spinning them off and moving on to the next big thing, Mike Hatfield is staying put as the Petaluma telecom company he co-founded in 2006, Cyan Inc., is absorbed by Ciena Corp. in a $400 million deal.

“I am committed to be part of this acquisition,” Hatfield said in an interview Tuesday, one day after his company announced it would be purchased by Ciena for a combination of stock and cash.

Speculation on Hatfield’s next step in the aftermath of the sale was rife, given his history as an instrumental player in a series of networking startups that made Sonoma County into a tech hub known as Telecom Valley in the 1990s.

“Mike has that knack for starting companies, growing them, and they managed to get bought,” said Ben Stone, executive director of the Sonoma County Economic Development Board. “It is just part of the series in his life. … He has that knack.”

Hatfield was an early team member at Advanced Fibre Communications, but left that Petaluma company after its 1996 initial public offering. He then helped to launch Cerent, which was acquired in 1999 by Cisco for $7.3 billion - the biggest buyout in Sonoma County history. Two months after the Cerent sale, Hatfield was back again at another startup, Calix, which in 2010 went public in an $82 million IPO.

Cyan, which Hatfield co-founded in 2006, went public in 2013 with an $88 million IPO.

Hatfield, who now serves as president of Cyan, said he did not want to comment on what role he or Cyan CEO Mark Floyd will assume in the Hanover, Md., company. A filing with the U.S. Securities and Exchange Commission said Hatfield would be a senior vice president for Ciena in a combined division that will result from the merger.

“In terms of the specific integration, none of that will be announced until after the acquisition is complete,” he said. The deal is expected to be finalized in the third quarter.

When asked about any potential job losses at the 260-employee Petaluma company following the acquisition, Hatfield noted that Ciena officials have spoken highly of Cyan in their public comments. On Monday, Ciena CEO Gary Smith said that instead of consolidating the past, the sale helps accelerates the future. An SEC filing said the Petaluma facility will “be home to a new center of excellence.”

“They recognize a strong team here,” Hatfield said. “Petaluma is important.”

Cyan develops and sells software and equipment to help telephone companies, data centers and private network operators reduce the cost of moving data quickly across their network. Ciena is one of the nation’s top fiber-optic providers as telecoms continue to replace their copper lines with high-speed broadband connections.

Cyan, which has 180 customers worldwide, has been lauded for its Blue Planet software, and Ciena officials in a Monday conference call noted it can help provide greater automation at faster speeds for carriers.

Hatfield said the two companies have a more “complimentary” business than direct competitors, though the SEC filing noted there likely is overlap in the two firms’ hardware product portfolios. Michael Howard, senior research director for Infonetics Research, said in an email it was “a good marriage.”

Hatfield said the industry is trying to manage expectations as consumers and businesses want faster speeds, but are reluctant to pay more for them, forcing network providers to find avenues to meet such challenges.

For example, Hatfield said there is still apprehension for a Web viewer on whether a simple streaming video will function when the user hits play, noting there is no “magic button” to make sure it works. “We are still in the dark ages in trying to do this,” Hatfield said.

In the aftermath of the sale announcement, more than a dozen law firms questioned whether Cyan’s board of directors negotiated the best possible price for the company.

For example, San Diego law firm Robbins Arroyo noted that Cyan reported on Monday that its first-quarter revenues grew to $36 million, an increase of 89 percent from the same period in 2014. The firm said it was searching for shareholders who may want to file a class-action lawsuit given Cyan’s decision “to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.”

Institutional investors have 44 percent of the company’s stock. SEC filings show that as of Feb. 15, Hatfield owned 2.3 million shares and Floyd 438,114 shares.

The company’s stock peaked at $13.92 a share less than two weeks after its May 2013 IPO; it had been trading between $2.45 and $4.25 per share this year before Monday’s announcement. The deal values Cyan’s stock at $4.75 per share, which is a 30 percent increase over its closing price on Friday of $3.65.

Hatfield did not comment on the potential lawsuit claims, but said the acquisition has been lauded, including by some Wall Street analysts. That response included a note from Wells Fargo analysts who said the sale should help increase Ciena’s growth in fiscal 2016, as early as the first quarter.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.