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Is Ericsson the Hope for Nortel's MEN?Is Ericsson the Hope for Nortel's MEN?

Nortel's Metro Ethernet Networks group stays in line with the rest of the company, and that might interest suitors

Phil Harvey

August 10, 2009

3 Min Read
Is Ericsson the Hope for Nortel's MEN?

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)



Carrier Networks ($B)




Enterprise Solutions ($B)




Metro Ethernet Networks ($B)




LG-Nortel ($B)




Other segments ($B)




Source: Nortel Networks

Table 2: Metro Ethernet Networks Revenues (by Category)



Optical Networking ($M)




Data Networking and Security ($M)




Services ($M)




Source: Nortel Networks

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

About the Author(s)

Phil Harvey

Editor-in-Chief, Light Reading, Light Reading

Phil Harvey has been a Light Reading writer and editor for more than 18 years combined. He began his second tour as the site's chief editor in April 2020.

His interest in speed and scale means he often covers optical networking and the unsung technologies powering the modern Internet.

Harvey covered networking, Internet infrastructure and dot-com mania in the late 90s for Silicon Valley magazines like UPSIDE and Red Herring before joining Light Reading (for the first time) in late 2000. After moving to the Republic of Texas, Harvey spent eight years as a contributing tech writer for D CEO magazine, producing one-off columns about everything from supercomputing startups to nanotech discoveries. Those columns aged about as well as an open carton of milk on hell's front porch.

Harvey is an avid photographer and camera collector – if compulsive shopping and "collecting" are the same thing. His work can be seen by opening one of the dozen dusty shoe boxes in his attic and bedroom closet. "Don't wake up the gray cat," is his advice to art curators of the future.

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