Ciena CEO: Nortel deal would make us ‘largest’ in North American optical Ethernet
Ciena’s (NASDAQ:CIEN) $521-million bid for Nortel Networks’ optical and metro Ethernet business would be a transformative one for the mid-sized though historically acquisitive Ciena. Ciena may yet be outbid for the assets, but if it closes, the company stands to potentially double or triple its annual sales and perhaps double its workforce. The company’s CEO, Gary Smith, spoke with Ed Gubbins today about the deal’s implications.
On how the deal would change Ciena’s stature: It would take us to about 18 of the world’s 25 largest network operators. It would make us the largest player in North America in optical Ethernet and really the only player that’s just focused on that, compared to all the larger folks who are more generalist, trying to be all things to all people. It would create a North American player that would be the largest focused on this particular space. It would get critical mass globally in that space. [Nortel is] strong in certain parts of Asia where we’re not. The European footprint is complementary. They bring the two largest carriers in Canada as well. It’s a very good fit from a geographic and customer point of view. It adds penetration in pretty much all the major tier-ones in North America. It brings both new tier-ones and strengthens our position in a lot of the [existing] large ones. So it makes us more meaningful to these large carriers.
On the technology: There’s really not a lot of overlap. We tend to be stronger into the metro side. They’re strong in long-haul. They’re very good on bad fiber, both on the 40G and potentially onto the 100G too. They’re very good at getting capacity out of fiber that’s challenged – things like submarine and older fiber. There’s a lot of old fiber in the world.
It’s early days on the portfolio, but we would look to integrate on the control plane in terms of software automation, which is a key part of our strategy. That control plane integration on the metro side, with the switching -- we just announced 5400 and the CoreDirector FS -- talking to those transport platforms and integrating the control plane would make an awful lot of sense.
On PBB-TE, the technology that was a large focus of Nortel’s metro Ethernet unit when it was formed in 2006: We’re strong there, with [our] WorldWide Packets [acquisition]. They’ve been strong there historically. [PBB-TE] has got its place in the network, as do other connection-oriented Ethernet implementations. I wouldn’t say we specialize in it. But it would be part of the portfolio.
On a role for the unit’s president, Philippe Morin: It’s way too early to say, but we’d clearly look to retain key talent. We’d take about 2000 employees, which is the vast majority of the folks and the leadership. That’s part of what you’re buying.
On paying for it: We’ve got $1.1 billion in cash and equivalents. We also think it will be accretive in 2011; it will generate cash. We think we’ve got sufficient capital to cover that. But we’ll look at our working capital structure.[More to come. Check back for updates.]
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