Posted by: Tom Nolle
Ciena, Ethernet, Juniper, Nortel, NSN
It’s almost time to play “Who’s Got the Nortel Ethernet” assets, with the auction coming in little more than a week. The big question is whether NSN, Cisco or another player might jump on Ciena’s stalking-horse opening bid.
Most financial industry speculation is aimed at NSN, whose numbers seemed to show more product sales erosion than others in the market. At NSN’s analyst event, there was a sense that professional services were the name of the game, though of course they could never sustain a business of that size. Furthermore, nobody knows how much of the professional services business NSN could get without a strong equipment base. In short, NSN needs to sell gear.
The Nortel stuff would bring them a much better North American presence, one of the problems NSN is contending with. It may collide with the Juniper/NSN joint venture, however, enough to reduce its overall value. We don’t think NSN could up the Ciena bid more than about $250 million without paying so much the Street would trash its stock. We also wonder whether more low-OSI-layer assets will really help.
Our feeling: leave Nortel alone.