Ciena Beats Nokia To Acquire Nortel Unit

For months now, Nokia and Siemens have coveted pieces of bankrupt Nortel Networks, bidding hundreds of millions of dollars for different Nortel units as they've come up for sale.

It's all been for naught as Nokia Siemens Networks' effort fizzled out late Wednesday when its last bid for Nortel's Metro Ethernet Networks was rejected in favor of Ciena $769 million bid. In a last-ditch effort, NSN had offered $810 million, but Ciena and Nortel had already sealed the deal, which was approved by the U.S. Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice in Canada.

Ciena began the stalking horse auction in early October with a bid for $521 million to acquire Metro Ethernet Networks' optical networking and carrier Ethernet assets. No opposing bids materialized for several weeks. Then Nokia Siemens Networks and its private equity partner, One Equity Partners, entered the bidding and drove up the price to $769 million.

At that point, NSN dropped out saying it believed "its final offer represented fair value for the assets, and further bidding could not be financially justified."

But NSN changed its mind and, according to media reports this week, challenged the Ciena win in the bankruptcy proceedings where Nortel, which filed for bankruptcy in January, is being broken up. But it was too late and Ciena claimed victory just before midnight Wednesday.

"We will be intently focused on integration as we work together to deliver the benefits of this transaction," Gary Smith, Ciena's CEO and president, has said of the acquisition. "With this combination, we are bringing together complementary technologies in switching and transport to offer customers a practical path for transitioning to automated, optical Ethernet-based networking."

Ciena stockholders appeared unhappy with the transaction, which requires Ciena to take on sizable debt and nearly double its size. Ciena stock dropped more than 5% in early trading Thursday.

As for NSN, the bidding represented another setback. NSN opened the bidding for Nortel's crown jewel -- its CDMA/LTE unit -- with an offer of $650 million earlier this year, but was eventually trumped by Ericsson, which bid $1.3 billion for the operation. In September, Siemens Enterprise Communication and its private equity partner, Gores Group, entered the bidding for Nortel's Enterprise Solutions operation, but Avaya captured that auction after it boosted its bid to $900 million.

Rajeev Suri, who became chief executive of Nokia Siemens Networks on Oct. 1, is is reported to be preparing to improve NSN's market share figures while also laying off more than 5,000 employees. The firm's failed efforts to pick up Nortel units indicate building market share won't be an easy task.