Nortel's future may rest with fiber optics and MEN unit

Nortel Networks Corp. will be disassembled in coming months, as units are sold off at fire-sale prices to help it restructure after filing for bankruptcy, analysts say. As North America's largest telephone equipment manufacturer tries to maintain at least a small place at the table, it's likely to hold on to Metro Ethernet Networks, the unit it tried unsuccessfully to sell last year.

The Canadian company may end up counting itself lucky no suitor stepped forward when MEN was on the block. The little unit has turned into a profit center for Nortel, generating $360 million in Q1 revenue selling Internet infrastructure, including Nortel's optical and carrier ethernet technology.

And, with telecom companies trying to boost bandwidth on the cheap, MEN's new technology that quadruples the capacity of networks using fiber-optic cables thinner than a human hair is looking like a hot item.

"(Nortel will be) smaller, obviously, but it would be a viable company capable of competing in that space," said Duncan Stewart, an analyst at DSAM Consulting in Toronto who has followed Nortel since 1990.

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