From stalking horse to ponying up more than three quarters of a million bucks, Ciena will be taking home most of Nortel’s Metro Ethernet Networks (MEN) business for $769 million, the companies announced Monday.
Ciena was chosen as the winning bidder for Nortel’s optical and carrier Ethernet assets after putting in the original $521 million bid more than six weeks ago. Unfortunately, there’s no Buy it Now button in bankruptcy court and someone drove the bid up for the bankrupt Canadian vendor’s assets.
A little birdie talking to the Reuters wire service seems to think it was Nokia Siemens Networks.
The final bid by Nokia Siemens Networks, which had teamed with private equity firm One Equity Partners, came “very close” to Ciena’s offer, the source said.
The purchase price will be $530 million in cash plus $239 million in 6% senior convertible notes due 2017. The interest rate on the notes will ratchet up to 8% if the stock price falls below $13.17, Friday’s closing price. (Which it already has, by the way.)
But enough of the horse race. What’s next for carriers?
Light Reading says there will be a significant overlap between Ciena/Nortel products, particularly in WDM transport. Editor Craig Matsumoto also points out Ciena will likely get a leg up in the gigabit Ethernet world, but notes the long-term worth of the merger for Ciena is still anyone’s guess.
Whether it’s all worth it to Ciena is still up for debate, though. In the year since Nortel first tried to sell MEN, some of the shine has come off, says Simon Leopold, an analyst with Morgan Keegan & Company Inc.
“Buying this Nortel asset is like buying a used car. You know it’s a used car, but you’re not sure: Has it been in an accident? Is everything working right? We know some talent has left, and we know that the value’s declined. We know it’s damaged goods, but we don’t know by how much,” Leopold says.
<Did you see the blaze of light as Huawei’s streaked past Alcatel-Lucent on its way to becoming the top optical networking equipment vendor for the first time in Q3? Upsetting long-term record-holder Alcatel-Lucent, Ovum reported Asia-Pacific markets are tearing up the market segment, especially in China, which Ovum said is propelled by 3g mobile network builds. And when China builds, Huawei benefits. Huawei now leads the optical market by almost 3%, Ovum said.
Clearly on a roll, the Del’Oro group reports Huawei is in second place in the mobile networking market in Q3, still far behind Ericsson, but Huawei’s market share went from 11% last year to 20%.
Overall, the optical networking market is down 10% compared to Q308, but global spending still totaled $3.6 billion in Q3 and a recovery appears to be in progress. Several of the top 10 optical vendors have seen improved revenue (including Cisco, Fujitsu, NEC, Tellabs and possibly Nortel), but ZTE, the other Chinese powerhouse, edged out Fujitso for #4. In the hard-knock life category, Nokia Siemens Networks (NSN) fell from #5 in Q308 to #8th, behind Tellabs, a year later. Comeback-kid Cisco also edged out Ciena to re-enter the top 10.
At SuperCOMM 09, I heard from Michael Mullineaux, marketing manager at Nokia Siemens Networks, who demonstrated an application that would combine location with e-commerce and book an evening in Las Vegas from a mobile device.
Ah, young love. When Amazon launched the Kindle almost two years ago, the company proposed to Sprint Nextel Corporation: Support us! The wireless carrier accepted. They took the solemn vow to be partners in sickness and in health, in good times and in bad.
Although the Kindle was earning Sprint only $2 ARPU, the carrier was still reaping huge profit margins as Amazon picked up most of the operational costs.
But they say one in two marriages end in divorce, right? This couple is no exception. Amazon Kindle Director Russell Baker confirmed Amazon is dumping Sprint for AT&T so that it can support international users, according to FierceWireless.
“Sprint’s network uses CDMA technology, while AT&T’s uses the much more widespread GSM technology … Amazon’s decision to drop the CDMA Kindle is a blow to Sprint, which in the first quarter of the year touted its sales of the Amazon Kindle e-reader device as driving the majority of its 394,000 wholesale additions.”
No word from Sprint yet on this. We hope they’re not drowning their sorrows in a gallon of Edy’s, as we’re prone to do after a bad breakup.
The Kindle DX operates on the Sprint mobile broadband network, so Kindles currently in use or already in the sales pipeline will still be powered by Sprint. Sprint has enjoyed a long and successful relationship with Amazon—since the Kindle first launched. We understand their international strategy and look forward to working with them on future projects.
While tongues were wagging at Supercomm 2009 about and upcoming decision from the FCC on net neutrality, I took some time to sit down and learn more about the long-term challenges telecom operators are facing over the next year.
Brian Wood, vice president of marketing for Continuous Computing, a San Diego-based component manufacturer for network equipment providers, laid out the road ahead from where he sees it.
Continuing its bankruptcy-ignited fire sale, Nortel announced that it has struck a deal with Tokyo-based electronics heavyweight Hitachi to part with a piece of its Long-Term Evolution (LTE) business — specifically, “certain assets associated with the development of next generation packet core network components,” according to a press release — for $10 million. Not that it’s trying to be cryptic or anything.
Of course, Hitachi will face lots of LTE competition from other vendors. Despite that, the insolvent Toronto-based vendor said:
Under the agreement, the assets include software to support the transfer of data over existing wireless networks and the next generation of wireless communications technology, including relevant non-patent intellectual property, equipment and other related tangible assets, as well as a non-exclusive license of certain relevant patents and other intellectual property.
Nortel said the agreement excludes legacy packet core components for its global system for mobile communications (GSM) and universal mobile telecommunications system (UMTS) businesses. Its GSM and GSM-Railway businesses are slated for an open auction on Nov. 9.
While Monday’s announcement did drop some new information on the asset front, the song remained the same for Nortel’s embattled shareholders.
The move comes “barely 18 months after becoming northern New England’s dominant telecommunications company, fulfilling critics’ predictions that the company wasn’t up to the task,” the Associated Press reported.
FairPoint also just invested $85 million in 368 miles of fiber into its core network across Maine, New Hampshire and Vermont. Ouch. I imagine they feel a little like I did after shelling out for a new radiator on my car, only to find there was a transmission leak a month later — but they’re probably much, much more irritated, huh?
The Charlotte, N.C.,-based carrier is best known for its operations in Maine, New Hampshire and Vermont, where it bought Verizon’s wire lines and Internet network for $2.3 billion in 2008. FairPoint sells wire line, broadband, data, Internet and TV in 18 states. The provider also just invested $85 million in 368 miles of fiber into its core network across Maine, New Hampshire and Vermont.
According to the AP, FairPoint has struggled “under a large debt and falling revenues, as well as customer-service, billing and other problems since switching over to its own computer systems in northern New England nine months ago.”
As expected, the company is promising the fallout won’t affect company operations or customer services. Uh-huh.
“The day-to-day operations of our business will not be impacted by today’s actions,” said FairPoint CEO David Hauser. “We want to assure our customers, employees and vendors that we remain committed to continuing to provide reliable, uninterrupted service to all of our customers. Today’s actions represent a critical and positive step in our efforts to reduce our indebtedness, strengthen our financial condition and position FairPoint to compete more effectively in a dynamic marketplace.”
Didn’t we discuss Huawei just last week in the optical arena? Yes we did. Now everybody’s talking Huawei in mobile infrastructure, and not just as the low-cost Chinese telecom equipment purveyor category. Huawei did its time as the low-priced spread, and now grudging respect, even fear among competitors is growing.
The most recent Infonetics Research report on mobile and LTE equipment asked service provider decision-makers in Europe, the Middle East and Africa (EMEA) and Asia-Pac what criteria they use when choosing a mobile infrastructure vendor. The bottom line is that Huawei is on everyone’s radar for good technology and good value for the price, and ZTE is on the rise, too, according to Stephane Teral, Infonetics principal analyst for mobile and FMC.
Infonetics notes that Huawei is overtaking Alcatel-Lucent on many fronts and is nipping at Nokia Siemens Networks’ market position in the mobile infrastructure space. It’s true, however, that the service providers all named NSN in their top three mobile infrastructure vendor lists, and that Ericsson got the highest ratings for service and support (nice news for two vendors that had disastrous quarters).
I gotta say, any trade show that opens the ceremonies with some trash talkin’ has my attention.
After giving up a little hip-hip-hooray for Verizon’s long-awaited 4G network (ready for 60 devices thus far and expected to be in 25-30 markets next year) at the opening keynote of SuperCOMM 2009 on Wednesday in Chicago, CEO Ivan Seidenberg shelved his warm and fuzzy feelings there.
The Federal Communications Commission was on the cusp of releasing its proposed net neutrality regulations — a hard sell for the SuperCOMM crowd, to say the least. Seidenberg pretty much stopped short of calling the net neutrality proponents (and their sympathizers on the FCC) lefty wingbat commies.
“If this burdensome regime of net regulation is imposed on all parts of the Internet industry, it will inject an extraordinary amount of bureaucratic oversight into the economy’s main growth engine for the future,” he said.
Seidenberg said his main beef with net neutrality proponents was their suggestion “that network providers like Verizon and applications providers like Google, Amazon and others occupy fundamentally different parts of the Internet ecosystem — a binary world of ‘dumb pipes’ on the one hand and ’smart applications’ on the other.”
Verizon Wireless and Google — who has been at the front of Team Net Neutrality — are partnering to release a smartphone that runs on Google’s Android system.
“This is a mistake, pure and simple: an analog idea in a digital universe,” he said. “We can’t create smart economy by dumbing down our critical infrastructure.”
Telecom is a hard-knock life sometimes, like this week when Apple announced its most profitable quarter EVER. No small part of that smashing success is the 7.4 million iPhones sold in the quarter. Of course, in the U.S., AT&T benefits from those new iPhone users since they use AT&T’s 3G wireless network.
And then there’s Google. Last week the Android-backing company also crowed about increasing its net profit for the third quarter, declaring the recession almost over.
Meanwhile back at the network, while things are looking up, those in traditional telecom circles are talking about how to stem plummeting cost per bit and wondering if they can make a buck deploying 4G LTE networks.
So what does all of this iPhone success mean for wireless operators? For starters, Verizon hasn’t negotiated to also sell the iPhone, apparently, because its new ads are promoting the “Droid,” an Android 2.0 phone that may be supplied by Motorola (one of the Android mobile operating system’s original backers). And so we may be in for a new season of handset wars, which can be dangerous business, according to our telecom guru Tom Nolle. The weakness with the iPhone is the stress it’s putting on AT&T’s 3G network, Nolle reminded us. When Verizon moves to 4G LTE and introduces the Droid, both Apple and AT&T could face more heat.
Nortel, Ciena, optical networking, Carrier Ethernet, NSN
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