Ciena to Buy Nortel's Optical Networking, Carrier Ethernet Unit

The deal, which includes $530 million in cash, will give Ciena the products, platforms and IP that are used by Nortel in the business. Ciena's deal is a step in Nortel's decision to dismantle much of its business since filing for bankruptcy protection earlier in 2009. Several other vendors, including Avaya, Nokia Siemens and Telefon, have bought other Nortel units, such as the enterprise and wireless businesses.

Ciena is the latest networking company to get a piece of bankrupt Nortel Networks.

The two companies announced Nov. 23 that Ciena was the winning bidder for Nortel's optical networking and carrier Ethernet business. Ciena will pay "$530 million in cash and issue U.S. $239 million in aggregate principal amount of 6 percent Senior Convertible notes," which will come due in June 2017, Ciena said.

Ciena filed its "stalking horse" bid of $532 million 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 Dec. 2. The two companies also need the OK from courts in France and Israel.

The Ciena deal is the latest by Nortel as it works to sell of much of its businesses following the filing on Chapter 11 bankruptcy protection earlier in 2009. Nortel officials blamed the global recession for hobbling their turnaround plans.

Initially they planned to reorganize 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. Ericsson, already have bought parts of Nortel, including its enterprise business, CDMA (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 said it expects to offer jobs to at least 2,000 Nortel employees, which makes up 85 percent of the global employee work force for the company's 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 in revenue for Nortel in 2008, and about $556 million in the first six months of this year.

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