Ciena to buy Nortel unit for $521 million

Ciena has agreed to acquire Nortel's Metro Ethernet Networks business for approximately $521 million in cash and stock.

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The MEN business includes Nortel's optical networking and Carrier Ethernet assets. The two companies earlier this week confirmed they were in an advanced stage of negotiations for the sale. 

Ciena will pay $390 million in cash and 10 million shares of Ciena stock for Nortel's MEN business. Ciena's stock closed yesterday at $13.05.

The product and technology assets to be acquired include Nortel's long-haul optical transport portfolio, including the 40G/100Gbps systems; metro optical Ethernet switching and transport solutions; Ethernet transport, aggregation and switching technology; multiservice SONET/SDH product families; and network management software products. The agreement also includes all patents and intellectual property that are predominantly used in the businesses, and provides for the transition of substantially all of Nortel's Optical Networking and Carrier Ethernet customer contracts.

The assets to be acquired generated approximately $1.36 billion in revenue for Nortel in 2008 and $556 million in the first six months of 2009. Nortel says it has deployed 430,000 optical nodes to more than 1,000 customers in 65 countries, making Nortel – along with Ciena – one of the leading optical transport and switching vendors worldwide.

"We believe this transaction will position us for faster growth by giving us greater geographic reach, broader customer relationships and a deeper portfolio of solutions," said Gary Smith, Ciena's CEO and president, in a statement. "We believe we are best positioned to leverage these assets, thereby creating a significant challenger to traditional network vendors."

Ciena says it expects to offer employment to at least 2,000 Nortel employees, which represents more than 85% of Nortel's optical networking and Carrier Ethernet workforce. As of July 31, Ciena employed 2,110.

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"Today's announcement is a positive step forward for the future of Nortel's Optical Networking and Carrier Ethernet customers and employees," said Philippe Morin, Nortel MEN president, in a statement. "The sale of these businesses to a strong and stable buyer enables the innovation of one of the foremost leaders in the optical industry to continue to thrive."

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