As Nortel Networks Ltd. reported a second-quarter loss of $274 million (and another big loss) today, it's worth noting that the yearly drop-off in revenues for its Metro Ethernet Networks (MEN) unit was steep, but still in line with the company's revenues overall, which fell 25 percent from the year-ago quarter. (See Nortel Reports Q2.)

That could be a glimmer of good news for the MEN group. And at least one analyst feels Ericsson AB (Nasdaq: ERIC) should step up as the big suitor in the bid to secure Nortel's optical transport market share. More on that in a bit.

First, have a look at how the MEN group isn't so far out of line with what we now call Nortel:

Table 1: Nortel Revenues (by Segment)

Table 2: Metro Ethernet Networks Revenues (by Category)

Nortel noted that some of its big customers last year didn't spend as much this time around, saying, in a statement, that "revenues from certain customers in the second quarter of 2008 that did not repeat to the same extent in the second quarter of 2009..."

While Nortel's MEN group is no worse off than the rest of the company, it does stand out because the bidding war for its assets appears nonexistent. Sources say Nortel still can't seem to find a suitor willing to shell out what it thinks (but hasn’t said) its optical transport group is really worth. (See Who's Waving Their Wad at Nortel’s MEN?, Selling Nortel's MEN, and NSN May Buy Other Nortel Assets.)

As hinted earlier, one analyst thinks Nortel's MEN group still has value, and he singles out Ericsson as the most logical suitor.

"At some price, MEN has to be valuable to someone, but it’s certainly a far cry from the prices Nortel was originally seeking," says Heavy Reading analyst Sterling Perrin.

"Ericsson still seems to be the best fit for MEN, based on Nortel’s North American presence in optical and Ericsson’s lack of optical networking market share. Most other potential suitors have a fair amount of overlap and so would really only buy or need bits and pieces of MEN," he says.

Also, it's a scenario that fits Ericsson's behavior, since the company is already in the process of using Nortel assets to strengthen its hand in North America. (See Ericsson Delivers Knockout Blow to NSN.)

Something should happen soon, though, because Nortel's MEN is losing its luster, even in the more cutting-edge technologies like 100-Gbit/s optical transport, Perrin notes. "I am seeing a lot of companies developing this technology internally now, so I’m not sure that Nortel’s 100G is as valuable as it was to suitors even 12 months ago."

— Phil Harvey, Editor-in-Chief, Light Reading