Ciena Snaps Up Nortel’s Optical And Ethernet Assets

The breakup of Nortel Networks continues, after Ciena won an auction to acquire the division responsible for developing networking gear used to transmit data and voice traffic.

The two companies announced on Monday that Ciena was the winning bidder for Nortel’s optical networking and carrier Ethernet business. Ciena will pay $530 million (£319m) in cash and another $239 million (£144m) in convertible notes, which will come due in June 2017.

The announcement comes after Ciena filed its “stalking horse” bid of $532 million (£322m) for the Nortel business in October, setting a floor for other bidders.

The deal will go before bankruptcy courts in the United States and Canada for approval on 2 December. The two companies also need approval from courts in France and Israel.

The Ciena deal is the latest by Nortel as it works to sell off much of its businesses following the filing on Chapter 11 bankruptcy protection earlier this year. Nortel officials blamed the global recession for hobbling their turnaround plans.

Initially they planned to reorganise the company while under bankruptcy protection, but shifted focus instead, deciding to sell of most of its businesses.

Other vendors, including Avaya, Nokia Siemens and Telefon AB L.M. Ericcson, already have bought parts of Nortel, including its enterprise business, Code Division Multiple Access wireless unit and wireless technology business.

“These optical and carrier Ethernet assets bring exceptional technologies, talent and scale that will accelerate Ciena’s current strategy to deliver innovative network solutions to customers worldwide,” Ciena President and CEO Gary Smith said in a statement. “With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse with the scale to challenge the industry status quo.”

Ciena expects to offer jobs to at least 2,000 Nortel employees, which makes up 85 percent of the global employee workforce for the optical networking and carrier Ethernet business.

The deal would cover all products, platforms and intellectual property used in the business, according to Nortel officials. Ciena said the business generated about $1.36 billion (£819m) in revenue for Nortel last year, and about $556 million (£335m) in the first six months of this year.

Ciena officials expect to close the deal in the first half of 2010.