- The Washington Times - Thursday, October 8, 2009

TORONTO | Ciena Corp., the Linthicum, Md., maker of fiber-optic gear for phone companies, offered to buy Nortel Networks Corp.’s optical networking business for about $521 million to expand internationally.

The price includes $390 million in cash and 10 million shares of Ciena common stock, the companies said Wednesday. Revenue generated by the assets topped $550 million in the first half, Ciena said.

Ciena, which gets about two-thirds of its revenue from the United States, will use the deal to add fiber-optic network products, broaden its customer base in Europe and Asia, and add Nortel customers such as Spain’s Telefonica SA. Nortel’s optical business operates in more than 65 countries, providing high-speed data networks across cities.

“The deal could transform Ciena,” said Simon Leopold, an analyst at Morgan Keegan & Co. in New York.

Ciena shares rose 39 cents to close at $13.44 on the Nasdaq Stock Market. Its shares have more than doubled this year.

The acquisition “would accelerate our growth plans by a couple of years, both in terms of the customers and market reach it would give us,” Chief Executive Officer Gary Smith said in an interview.

While Ciena is focused on the Nortel deal, Mr. Smith said he “wouldnt rule out any other acquisitions.”

“Weve made a lot of acquisitions for a company our size and age, and we continue to look at that,” he said. He declined to name any specific targets or say how much the company would be willing to spend.

The Nortel unit is being sold through a so-called stalking-horse agreement, where a single buyer provides a lead bid that other parties can then try to top. That means there is no guarantee Ciena will win.

Nortel, which entered bankruptcy protection nine months ago, is selling its businesses piece by piece. The Toronto company has raised more than $2 billion from asset sales so far.

Ericsson AB agreed to pay $1.13 billion for Nortel’s wireless assets, outbidding a $650 million opening offer from Nokia Siemens Networks in June. Avaya Inc. made an opening offer for Nortel’s corporate phone gear unit of $475 million in July and then won the subsequent auction with a bid of $915 million.

Ciena would have to spend about $180 million to integrate the Nortel businesses, with most of those costs coming in 2010, Mr. Smith said. Ciena said it would offer jobs to as many as 2,000 of Nortels employees if the deal goes through.

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