Nortel Delays Optical Auction Ciena Thought Best Fit

Ciena Corp. (CIEN) seems to be the best buyer for Nortel Networks’ optical networking unit, but analysts aren’t confident the company has the resources to win the division at auction, which was supposed to take place today.

Ciena is the official “stalking horse” bidder for auction to sell the Metro Ethernet Networks (MEN) division. And as the first bidder, Ciena is prepared to plunk down $521 million and likely can’t pay much beyond that. That means another competitor – Nokia Siemens Networks is said to be interested – has plenty of time to find the means to swoop in at auction and grab Nortel’s MEN from Ciena.

“I think somebody else will step in and bid higher than Ciena to get their business,” Infonetics Research analyst Andrew Schmitt told NetworkWorld. “I see some challenges in terms of the overall cost and Ciena’s ability to afford the transaction.”

However, since Nortel has delayed the optical auction, according to the Wall Street Journal, perhaps Ciena also is taking advantage of the additional time to shore up financial reserves in case someone tries to outbid it.

And if Ciena does get its hands on Nortel’s MEN, it will have won a major advantage over its peers. The equipment maker would gain geographic reach and a customer base, and push it close to the Metro Ethernet sector of telecom, a Gartner analyst told NetworkWorld.

“It would also give them more user access with some of the partnerships Nortel has formed over the years,” Mark Fabbi told the publication. “Nortel has done a lot of work with IBM, and this deal would open up not just the carrier market but the financial services market as well.”

But first things first. Nortel reportedly wants higher bids than Ciena’s, something Nortel is neither confirming nor denying, and yet the auction is not taking place today as planned. A new date has not been announced.

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