Nortel Networks Corp., which has agreed to sell its carrier wireless and enterprise divisions, said Wednesday it reached tentative agreement to sell other assets to Ciena Corp.
Based on the most recent share price, this would bring the value of the sale to US$521 million, the proceeds of which would go to Nortel’s creditors, including bond holders and former employees who are owed severance pay.
Nortel has been operating under bankruptcy protection since Jan. 14 and has been trying to sell most of its assets since June.
Nortel initially tried selling its metro Ethernet assets a year ago but took them off the auction block.
The agreement between Ciena and Nortel is known as a “stalking horse” bid, meaning other companies could make higher bids. This is what happened with both the carrier wireless and enterprise deals. Avaya announced a stalking horse bid in July for US$475 million and had to increase its offer to US$915 million because two other companies – rumoured to be Siemens Enterprise Communications and MatlinPatterson – participated in the auction.
The agreement to sell the CDMA assets to Ericsson started with a US$650 million stalking horse bid from Nokia Siemens Networks in June.
It was not immediately clear whether the sale to Ciena will involve just intellectual property or whether Ciena would the buyer be taking on Nortel employees and facilities as well. Both Avaya and Ericsson agreed to offer jobs to some Nortel employees.
“Nortel cannot comment on the potential values or details of any potential agreement with Ciena or other third party,” a spokesman stated in an e-mail to Network World Canada.
Ciena is based in Linthicum Maryland, located south of Baltimore. Its products include service delivery switches, service aggregation switches and Ethernet Services Manager, which are used to provide backhaul for Clearwire’s WiMAX service in Las Vegas.
As of July 31, Ciena reported it has US$436 million in cash and lost US$554 million during the nine months ending July 31. Of that, the firm lost US $26.5 million during the most recent quarter.
The company has had the same president, Gary B. Smith, since October, 2000. Smith, who was also appointed chief executive officer in 2001, has been with Ciena for 12 years.
Nortel built up its optical networking business partly through acquisitions. For example, in 2000, Nortel bought Qtera for US$3 billion, so it could make products that would transport signals more than 4,000 km at 10 Gbps without using optical-electrical converters. That same year, Nortel bought photonic switching maker Xros for US$3.25 billion and Wilmington, Mass.-based CoreTek, which made vertical cavity surface emitting laser and micro-electromechanical systems for optical networking, for US$1.43 billion worth of stock.
