Uncommon Wisdom

Nov 23 2009   2:10PM GMT

Nortel Ethernet auction: Ciena ups bid, NSN steps back

Tom Nolle Tom Nolle Profile: Tom Nolle

NSN released a statement that it did not submit the highest bid for the Nortel Ethernet assets, and that means Ciena won the bid with a higher offer than its straw-man previous bid—rumor says nearly $770 million.

We think this is a good thing for NSN because we doubt the symbiosis would have been as strong. NSN is not a marketing company, and NSN needs to leverage any Nortel asset win far beyond Ethernet in order to gain value. That’s unlikely, given that NSN doesn’t have much in the way of higher-layer technology of its own. We also think that’s true of Ciena, perhaps even more true. Ciena can’t be buying market share at this point, particularly when it’s a North American company itself and thus has an opportunity to make its own way in accounts where Nortel was strong.

In technology terms, Nortel has been the originating champion of PBT, but was unable to keep the momentum going on its own concept, even though carrier interest in the technology was the highest of any in the history of our operator surveys. We don’t think Ciena is going to be strong enough in a marketing and strategy sense to keep it going either, and thus this bid may well kill PBT.

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