“I’m sure everyone at Nortel is happy to put this chapter behind them,” said Andrew Schmitt, directing analyst for optical at Campbell, Calif.-based Infonetics Research. “My guess is it’s going to be a very positive event for them. They will have a lot of the uncertainty about their future removed.”
Although Linthicum, Md.-based Ciena offered $521 million last month for the units of Nortel, this was a “stalking horse” bid, meaning other companies were invited to make higher offers.
Nokia Siemens Networks, a joint venture between Nokia Corp. and Siemens AG, was the only other company that placed a bid for the carrier Ethernet and optical networking assets, a Nortel spokesperson said Monday.
Nortel has been operating under bankruptcy protection since Jan. 14 and has been selling off most of its business units. In September, Avaya Inc. of Basking Ridge, N.J. bought Nortel’s enterprise business and on Nov. 13, Telefonaktiebolaget LM Ericsson completed the acquisition of most of Nortel’s wireless cellular business.
The sale of its carrier wireless unit to Ericsson and the enterprise business to Avaya started with stalking horse agreements. Nokia Siemens Networks made a US$650 million stalking horse bid in June for the carrier wireless assets that Ericsson eventually acquired.
Nortel announced last month it is also selling the unit that makes Global System for Mobile Communications (GSM) products, which include Mobile Switching Centre Server, Media Gateway and Home Location Register (HLR). This auction, originally scheduled Nov. 5, was delayed. Nortel said last week it plans to make an announcement this week on the GSM sale.
With the sale of the Ciena unit, Nortel has nearly dismantled the company originally established as Northern Electric, which started as Bell Canada Enterprises Inc.’s manufacturing unit.
The Nortel products that will benefit Ciena the most are those that route optical traffic at 40 Gigabits per second (Gbps) and 100 Gbps, Schmitt said.
The main products Ciena will inherit include the Metro Ethernet Routing Switch 8600 and the Optical Multiservice Edge 6500, Frodsham said.
The OME 6500 is designed to manage and transport voice and data services, and to provide multi-span links of more than 2,000 km without requiring in-line dispersion compensation equipment. The MERS 8600 is designed to provide virtual private
networking and video services at 1 or 10 Gigabits per second.
Frodsham said most of the business is with service providers, but it also sells to enterprise and government customers.
Buying Nortel’s carrier Ethernet and optical units will help Ciena sell to carriers who want to carry packet-based services, including video, over their networks.
“Look at what’s happening in video applications and the development of new services,” Frodsham said. “A good example is Cisco TelePresence.”
He added consumers using YouTube and cellular carriers upgrading to fourth-generation will place “tremendous stress” on carrier networks.
“Nortel’s technology leadership in terms of 40 G and 100G is well aligned to support those trends,” Frodsham said.
Ciena’s products include service delivery switches, service aggregation switches and its Ethernet Services Manager.
Infonetics predicts sales of optical network hardware will grow to US$17.2 billion a year in 2013. Sales in 2008 were US$15.5 billion.
Industry Canada is currently reviewing the sale of Nortel’s enterprise unit, which includes private branch exchanges (PBXs), routers, switches, phones, unified communications and firewalls. This is because Avaya is paying US$915 million for those assets, and the Investment Canada Act requires a review of all foreign acquisitions exceeding $321 million.