Telecom Timeout

Nov 24 2009   12:29PM GMT

Good MEN are hard to find: Ciena to pay $769M for Nortel’s CE/optical biz

Jessica Scarpati Jessica Scarpati Profile: Jessica Scarpati

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.

Despite the press release love-fest between the two vendors, the tech desk at Barron’s points out Ciena shareholders are not going to be happy with the IOU part of this deal.

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.

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