Why Shares of Ribbon Communications Tumbled Thursday

What happened

Just two weeks after Ribbon Communications (NASDAQ: RBBN) reported worse-than-expected third-quarter results that sent shares plummeting, the stock was getting slammed yet again on Thursday. Shares sank as much as 27.4% and were down 25.9% at the close.

The stock's sharp decline on Thursday follows news that the company's CEO, Fritz Hobbs, is stepping down. In addition, the company said it has entered into a definitive agreement to merge with network solutions specialist ECI Telecom Group to help the company enter the 5G market.

A chalkboard sketch of a chart showing a stock price moving lower.

Image source: Getty Images.

So what

Taking over Fritz's role are the company's lead of sales and services, Steven Bruny, and chief technology officer Kevin Riley. The two executives will serve as interim co-presidents and CEOs while Ribbon's board of directors works with an executive search firm to help hire a new CEO.

Regarding the company's merger with ECI, Ribbon agreed to acquire ECI for 32.5 million shares of Ribbon stock and $324 million in cash. As part of the deal, ECI shareholders will also receive $31 million from the sale of ECI real estate assets.

Now what

"With this transformational transaction, Ribbon and ECI will create a powerful, leading edge solutions provider with anticipated combined annual revenue of over $900 million, serving customers in more than 140 countries, and 4,000 employees worldwide," the two companies said in a joint press release about the deal.

The combined company, they say, will be positioned "for growth and to enhance its competitive strengths by expanding its product portfolio beyond solutions primarily supporting voice applications to include data applications and optical networking."

Investors don't seem to be as optimistic about the deal as management is.

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