Ciena Corp. (NYSE: CIEN) and a private equity group are believed to be in the running to table an initial bid for the Metro Ethernet Networks (MEN) division, according to an analyst report.

Ciena has long been identified as one of the leading candidates to bid for Nortel's well-regarded optical division. (See The Ciena Theory, MEN Watchers, and Who's Waving Their Wad at Nortel’s MEN?.)

And now, in a research note issued Friday morning, Jefferies & Company Inc. analyst George Notter writes that Ciena and an unidentified private equity firm are understood to be "the two finalists to be named the Stalking Horse bidder" for Nortel’s MEN business.

And Notter believes such a move would not be a good use of Ciena's cash. "We’re concerned that such a transaction could be a long-term negative for Ciena investors," he notes.

Ciena's CEO Gary Smith, though, is staying tight-lipped on the situation.

Talking to Light Reading on Thursday, Smith said the situation is "not something we can comment on," though, talking in general terms about the Nortel optical division, Smith stated that it has "some neat technology" in its 40-Gbit/s and 100-Gbit/s portfolio. (See Ciena Offers Hope.)

And earlier in the day, during Ciena's third-quarter earnings conference call, Smith noted that "consolidation is helpful... wherever those assets [Nortel MEN] end up will be helpful from an industry point of view."

Nortel declined to comment on any speculation of the potential sale of any of its assets.

The Canadian company is in the process of selling various chunks of its business, a process that is generating much industry speculation about potential bidders. (See Siemens to Join Nortel Enterprise Fray, Report: Stalking Horse Stampedes Toward Nortel's VoIP Biz , and Ericsson Delivers Knockout Blow to NSN.)

— Ray Le Maistre, International News Editor, Light Reading