- The Washington Times - Saturday, May 11, 2002

Shareholders of struggling Corvis Corp. approved the company's $94.2 million acquisition of a privately held telecommunications-equipment maker, the company said yesterday.

But the deal has lost more than 45 percent of its value since it was announced in January.

More than 80 percent of the shareholders of Corvis, a Columbia, Md., optical-networking firm, voted to approve the purchase yesterday of Dorsal Networks Inc. in a meeting at the BWI Marriott in Linthicum, Md.

Corvis announced in January that it planned to buy Dorsal, a nearly 2-year-old company also based in Columbia that makes telecommunications gear for underwater networks.

"We believe this merger is the right strategic fit for our business and the right decision to create value for our shareholders," Corvis founder and Chief Executive Officer David Huber said in a statement issued after the vote.

But Corvis' sinking stock price means the company will lose millions of dollars in the transaction.

Corvis will acquire all of Dorsal's outstanding shares in exchange for 41.7 million of its own shares. The purchase price was based on Corvis' closing price of $2.26 a share on Jan. 28.

Corvis shares have fallen nearly 46 percent since then, closing yesterday at $1.22 a share on the Nasdaq Composite Index.

The value of the merger has fallen from $94.2 million to $50.8 million.

In addition to serving as chairman of Corvis, Mr. Huber sits on the board of directors of Dorsal and owns about 31 percent of the private company's stock, according to a regulatory filing made by Corvis.

He said prior to yesterday that he would vote in favor of the acquisition of Dorsal, which employs about 100.

Corvis had already owned 3 percent of Dorsal.

Corvis' overpriced acquisition came two weeks after an earnings report that showed sales have slowed dramatically. Corvis reported first-quarter revenue of $8.7 million, down 90 percent from the $84 million in revenue a year earlier. Corvis reported a net loss for the quarter of $71 million, an improvement over the $100.8 million net loss from a year earlier.

"Corvis is well positioned to weather this challenging market. The near-term outlook is difficult for every company in our sector. But we believe our long-term prospects are good," Mr. Huber said.


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