Ciena’s Tom Mock explains Nortel auction win

Ciena (NASDAQ:CIEN) is set to roughly double in size – both in revenue and headcount – after having beat Nokia Siemens in an auction of Nortel Networks’ metro Ethernet business (which includes its optical business but not its fiber access or Passport multiservice switch products). Tom Mock, Ciena’s senior vice president of strategic planning, shed more light on the deal in an interview with Connected Planet this morning.

On why Ciena didn’t change its expectations for 2011 accretion after the 26% revenue decline Nortel reported for its metro Ethernet unit in the third quarter: I can’t say we were taken aback by [Nortel’s third-quarter earnings] results. Largely it’s attributable to two things: the overall economy and their customers being a bit more cautious because they were concerned about where the assets might ultimately land and what the future of those products might be. As a home for the assets, we’re probably pretty attractive to most of their customers because we understand the industry, we’ve been in this space for a good while, we focus on large service providers and network operators. We also place a high premium on innovation. The two things [customers] would have been concerned about – continuity of the product supply and continued innovation -- are things we could provide a lot more comfort around.

On the surprise win over Nokia Siemens and its partner, One Equity Partners: A lot of times when people hear ‘private equity,’ they think the amount of money available is unlimited. These assets fit well with our company, and we probably can get more leverage from them than pretty much anybody else could. There wasn’t as much overlap between our product lines and customer base…There are negative synergies in this deal, where you can talk about eliminating duplicate efforts. Most interesting to us is that the customer bases really don’t overlap that much, which gives us a chance to sell our products into their customer base and vice-versa.

On criticism that Ciena’s willingness to pay more than other bidders raises questions about the strength of its core business: This isn’t something we’ve got to have, but it has significant value for us because it accelerates our strategy by two to three years in terms of technology, customer base and coverage across a variety of different markets. In that regard, this is giving us a fair amount of additional fuel in the tank.