Is Ciena Ogling MEN?

10:15 AM -- What will become of Nortel Networks Ltd. 's Metro Ethernet Networks (MEN) division?

Six months ago the division, which houses Nortel's optical and carrier Ethernet assets, was officially on the block. (See Nortel to Sell Carrier Ethernet, Optical Biz.)

Then, following its bankruptcy protection proceedings, Nortel seemed keener to hold on to it. (See Nortel to Hold MEN and Nortel Files for Bankruptcy Protection.)

Now, according to this Bloomberg report, Ciena Corp. (NYSE: CIEN) is considering a bid for the business that includes Nortel's 100 Gbit/s optical platform. (See Et Tu, Morin? Then Fall, CESR!)

The rumor comes only a few weeks after Nortel announced the sale of some enterprise data assets, and only days after reports suggested Nortel is close to selling off its wireless and enterprise business units. (See Is Nortel Prepping a Major Sale? and Nortel to Offload Data Gear to Radware.)

Well, we love a bit of speculation here at Light Reading -- so much so that, when Nortel announced in September last year that MEN was up for sale, we canvassed the industry to determine the most likely (if any!) buyer. (See Huawei Seen as Likely Nortel Suitor.)

At the time, only one person of 50 cited Ciena as a potential buyer of Nortel's MEN division.

Was that individual a sage? Or a crazy person? EuroBlog can almost smell the excitement -- and it smells like cherry pie...

— Ray Le Maistre, International News Editor, Light Reading

waverunner 12/5/2012 | 4:09:13 PM
re: Is Ciena Ogling MEN?

In October they were looking for an all cash deal in the area of 1:1 to revenue, there weren't many companies that would have offered that, certainly not Ciena.

At 30% of revenue, I expect Ciena would have been mentioned more often as a potential buyer. I expect Nortel customers are looking for a white knight and Huawei is not acceptable.-


HomerJ 12/5/2012 | 4:09:13 PM
re: Is Ciena Ogling MEN? hey LR, who is this "person familiar with the matter"? hows about some new news and not a Bloomberg reprint?
hyperunner 12/5/2012 | 4:09:12 PM
re: Is Ciena Ogling MEN?

Am I missing something?

Aren't there three main reasons that one company acquires another?

<li>To get access to products they don't already have.</li>
<li>To get access to technology they don't already have.</li>
<li>To get access to customers or markets where they're not already present.</li>

I can't think of any significant gain that Ciena would enjoy in any of these areas by acquiring MEN.- In fact there would be considerable overlap in both product ranges and target markets between Ciena and MEN - and we saw the mess that Alcatel and Lucent got into with these kind of huge overlaps.

And worse than that - Ciena already has a-bunch of debt.- Why would they go further into the red to buy-products they already have, technology they already have, and markets to which they already have access?

I'm more than happy to be corrected on this.- I would much rather see MEN go to Ciena than Huawei.- But not if the resulting debt burden would sink Ciena.

The companies who are going to survive this mess are the ones without long term debts.



fiberslut 12/5/2012 | 4:09:10 PM
re: Is Ciena Ogling MEN?

...it might not quite smell quite like cherry pie, and in fact given the amount of refuse and rotting remains that is MEN it might be more akin to a manure smell....

.....but, great things grow from manure, no?- some areas where this might be accretive to CIEN:

--40G and 100G technology - CIEN has been re-selling Stratalight and Mintera solutions, so this would move this key strategically important technology in-house (better margins?)

- CoreStream has become a bit of a dog.- Maybe MEN's LH products re-energizes CIEN's product portfolio in this area.

- Despite countless bum acquisitions, CIEN still doesn't have a SONET/SDH MSPP in its portfolio.- MEN would provide OME6500

- And despite claims of CN4200 glory ("next quarter, we promise"), and even though it was first introduced ten years ago, Nortel's OPTera metro product still racks up big revenues in teh metro WDM space.

Frankly, this might just be a way to extend the life of two dying businesses by a few years, but even if so its better than MEN dying in the next year from customer flight, and it'll give CIEN folks a few more years of employment.- Interesting to see how two sworn enemies would get along as one though.....


t.bogataj 12/5/2012 | 4:09:03 PM
re: Is Ciena Ogling MEN?


you are forgetting the fourth reason to acquire a company: to shut it down and get rid of a competitor. Well, possibly in combination with your reason No. 3.


hyperunner 12/5/2012 | 4:09:01 PM
re: Is Ciena Ogling MEN?

Hi T.

you are forgetting the fourth reason to acquire a company: to shut it down and get rid of a competitor.

Yes, that is another-good reason.- Can't see it being too compelling in this case because Nortel is a busted flush - service providers all have plans in place to "remove their strategic exposure to Nortel".- Ciena doesn't really need to "take out" Nortel - they're already out :-)

However, I can see a slight modification on your argument.- Acquire Nortel to stop Huawei getting them.- But that's a pretty expensive way to stop the Chinese getting a foothold in N.America.



Stevery 12/5/2012 | 4:09:00 PM
re: Is Ciena Ogling MEN?

However, I can see a slight modification on your argument.- Acquire Nortel to stop Huawei getting them.-

Alternatively, putting in a bid (with no intention of follow-thru) in order to make Huawei pay more isn't a bad idea.--

But frankly, "letting" Huawei swallow Nortel would be a great defensive move by Ciena.- Just imagine the chaos inside nortel after that; they would be paralyzed from the neck down.- And then Huawei would be preoccupied with "fixing" it.-

In any case,- I kinda doubt that Huawei is so stupid as to try and swallow a nonfunctional company.

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