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Nortel Ready to Sell MEN to Ciena?

Months ago, xchange asked Ciena Corp. if it was interested in the Metro Ethernet Networks (MEN) unit up for sale at struggling Nortel Networks Corp.

“We’ve always said we will invest where we see opportunities to advance our specialist role and further differentiate ourselves in the market. To that end, M&A has been a piece of our strategy from the start and will likely continue to be,” a Ciena spokeswoman told us.

Well, in February, Nortel said it was putting on hold plans to sell the profitable MEN division. But now comes word that Ciena – which has seen sales plummet during the past two years – is negotiating to buy MEN for around $300 million. That’s far, far less than the reported $1 billion Nortel originally thought it could get out of MEN.

Nortel has said it wants to shift to a software-driven business model once it emerges from bankruptcy and indeed, news filtered out last week that the company probably will be broken into separate pieces after that reorganization. So once again trying to sell MEN would fit that aim and give Ciena more stature in the optical equipment world. According to research firm Infonetics, Ciena ranked No. 6 in the United States as of September 2008.

There’s a catch, though. Ciena earlier this month reported quarterly losses of $25 million and cut 200 jobs. And in a credit crunch, money for acquisitions is hard to come by. Yet, some analysts are saying that if Ciena doesn’t grow, it will be in big trouble. So, it sounds like Ciena is caught between a rock and a hard place; and whatever it does, it needs to make a move soon.


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