Ciena crafts deal for Nortel's Ethernet assets

Ciena made it official today that it will acquire Nortel's carrier Ethernet business in a $521 million stalking horse agreement. Interestingly, Ciena took down a previous news release that announced it would acquire Nortel's Metro Ethernet Network (MEN) unit for $400 million and 10 million shares. Ciena replaced the initial release with an announcement that was it in advanced talks with Nortel for the Ethernet assets.

Under the terms of the latest cash and stock agreement, Ciena will acquire Nortel's optical networking and carrier Ethernet businesses in addition to patents and intellectual property. Ciena will pay $390 million in cash and 10 million shares of Ciena common stock. Through the acquisition of the Nortel assets, Ciena will instantly enhance its own Ethernet and optical portfolio with Nortel's OME 6500, OM 5000 and CPL platforms, its 40/100G technology and related services business. In addition, Ciena will make employment offers to at least 2,000 Nortel employees, and as of July 31, 2009, Ciena employed 2,110 employees globally.

However compelling the deal might appear on paper, analysts cautioned that it will have various near-term implications. "Ciena would go from a product cycle story to one of scale," wrote UBS analyst Nikos Theodosopoulos in a research note. But he added that Ciena's balance sheet would move from a net cash position to one of net debt.

Of course, Ciena's purchase is far from a done deal. There's always a possibility that Ericsson, Nokia Siemens Networks or Infinera could launch a counterbid for Nortel's Ethernet assets.

For more:
- see the Nortel release here
- Reuters has this article

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