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Ciena wins Nortel Ethernet unit

Mon, 11/23/2009 - 7:35am
Brian Santo

Ciena has won the optical networking and carrier Ethernet assets of Nortel’s Metro Ethernet Networks (MEN) business for $769 million, with $530 million of that in cash and $239 million in convertible notes due June 2017.

The only other bidder reported was Nokia Siemens.

Ciena President and CEO Gary Smith said, “With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse with the scale to challenge the industry status quo and offer customers a practical path for transitioning to automated, optical Ethernet-based networking.”

The assets to be acquired generated approximately $1.36 billion in revenue for Nortel in 2008 and $556 million (unaudited) in the first six months of 2009. Ciena expects the transaction to be significantly accretive to Ciena’s results of operations in fiscal 2011.

Ciena is also expected to make employment offers to at least 2,000 Nortel employees, which by one calculation is approximately 85 percent of the operation’s workforce. It would nearly double Ciena's workforce.

Ciena's purchase includes all products, contracts, patents and intellectual property, including the rights to technology that boosts the speed and capacity of fiber-optic networks by as much as tenfold.

Nortel's optical networking business includes some of Nortel's most sought-after businesses units, intellectual properties and employees.

Ciena had already received indication from both the U.S. and Canadian governments that the deal would be approved. Nortel is currently in bankruptcy proceedings; the bankruptcy court must still OK the deal. The transaction is expected to close in the first calendar quarter of 2010.

Customers of Nortel's Metro Ethernet business include Comcast, AT&T and Verizon.

Earlier this month, Nortel completed the sale of its wireless network business to LM Ericsson of Sweden for $1.13 billion. In September, it announced the sale of its enterprise solutions business to Avaya for $900 million.

Ciena, based in Linthicum, Md., won court approval in October to bid on Nortel's units.

– The Associated Press contributed to this report

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