NSN Hopes Dashed as Ciena/Nortel Deal OK'd

The credits rolled late Wednesday on the latest Nortel Networks Ltd. assets sale action adventure when courts in Canada and the U.S. dismissed an objection from Nokia Networks and confirmed the sale of the bankrupt Canadian vendor's Metro Ethernet Networks (MEN) unit to Ciena Corp. (NYSE: CIEN). (See Nortel Sales to Ciena, Ericsson Approved.)

Ciena had emerged from the recent auction of Nortel's carrier Ethernet and optical assets as the winner, having bid $769 million in cash and convertible notes. But its auction rival, Nokia Siemens Networks (NSN), had challenged that outcome, saying it was prepared to pay $810 million for Nortel's MEN. (See Ciena Beats NSN to Buy Nortel's MEN and NSN Might Rebid for Nortel's MEN.)

But Nortel announced it received approval from the United States Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice for the sale of its Optical Networking and Carrier Ethernet businesses to Ciena, and the far less contentious sale of its GSM and GSM-R businesses to Ericsson AB (Nasdaq: ERIC) and Kapsch CarrierCom AG . (See Ericsson Buys Nortel's GSM Biz Too and Nortel GSM Biz Goes to Ericsson, Kapsch.)

NSN doesn't plan to take the matter any further. "While we are confident that our offer would have provided superior value to the creditors of Nortel, we respect the outcome of the court process. We will not appeal," a company spokesman told Light Reading in an email.

The Ciena deal is still subject to additional court approvals in France and Israel, plus other approvals and conditions. Nortel expects the sale of the MEN and GSM businesses to be completed by the end of the first quarter 2010.

The outcome will disappoint some Ciena investors -- the optical equipment firm's stock fell on the news it had won the MEN auction after its winning bid was deemed too high -- but will please at least one analyst and, of course, the Ciena management. (See The Case for Ciena/Nortel, Gary Smith, CEO, Ci-MEN-a, Nortel's MEN: Winners & Losers, and Smith: Why Ciena Wants to Reign Over MEN .)

Ciena's share price closed Wednesday at $12.88, before the news of the court decision was announced.

The approval of the MEN sale will also disappoint NSN, which will now need to look for other acquisitions to help it regain market share and return to profitability. (See NSN CEO: Don't Write Our Obituary and NSN Targets Greater Market Share.)

— Ray Le Maistre, International News Editor, Light Reading