Nortel Liquidation Continues: Company to Sell Optical Unit to Ciena

Nortel is in the last phases of liquidation.

As part of the continuing saga of the Nortel liquidation, the company announced agreements covering the global sale of its Optical Networking and Carrier Ethernet businesses to Ciena, a network infrastructure company that has competed fiercely with Nortel in the past.  “We believe we are best positioned to leverage these assets, thereby creating a significant challenger to traditional network vendors,” said Gary Smith, Ciena’s CEO.

Under the supervision of bankruptcy courts in the U.S. and Canada, Nortel and its principal subsidiaries, which filed for bankruptcy in January, have entered into a “stalking horse” asset sale agreement with Ciena for its North American, Caribbean and Latin American (CALA) and Asian Optical Networking and Carrier Ethernet businesses, and an asset sale agreement with Ciena for the Europe, Middle East and Africa (EMEA) portion of its Optical Networking and Carrier Ethernet businesses for a purchase price of $390 million in cash and 10 million shares of Ciena common stock.

The agreements cover Nortel’s OME 6500, OM 5000, and CPL platforms, its 40G/100G technology, the related services business, and all patents and intellectual property that are predominantly used in these businesses.  The agreements also provide for the transfer of almost all of Nortel’s customer contracts to Ciena.

The company announced that at least 2,000 employees, more than 85 percent of the workforce of the units being sold, would be offered employment with Ciena.

As in any stalking horse sale, these agreements are far from final.  Nortel’s stalking horse agreement with Nokia-Siemens for its wireless unit ended with Ericsson as the acquirer back in July. The company’s enterprise unit was sold to Avaya, also in July.

On September 30, Nortel announced it will accept bids for its global GSM/GSM-R business.  GSM (Global System for Mobile communications) is the most popular wireless technology standard for mobile phones in the world. GSM-R is a technology that provides a secure communications system for railways operators.

David M. Goldes is president and senior analyst at Basex.

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