According to Reuters today, NSN has asked the bankruptcy court overseeing the bid process of Nortel’s MEN assets to block Ciena’s winning offer and subsequent acquisition. Read about it here.
This would be a bad move by NSN, in my opinion. The original bid by Ciena of $541 Million was about correct when compared to the other asset purchases/auctions of other Nortel assets earlier this year. The increased bid by Ciena leads me to believe that Ciena thinks these assets are so core to their business that they’re willing to bet their business on it. NSN must have a similar view as their numbers haven’t been stacking up lately and they might see the MEN customers as a way to offset some eroding marketshare.
We also have to take into account how these assets would impact the bottom line of whoever ends up purchasing them. The gross margin of optical/component heavy companies has been eroding steadily for several years and the last thing Ciena or NSN needs is to pay too much for something that will not boost the gross margin. If they’re counting on the Metro Ethernet to boost margins they had better be careful as Carriers aren’t asking for feature heavy, high margin metro gear as much as they’re asking for a simple grooming device that meets an aggressive price-per-port.
Nortel has some very interesting technology and inroads to customers that Ciena (or NSN for that matter) would want but a number of Carriers I’m talking to have already decided to start looking to other vendors for replacement of their current Nortel, regardless of who wins this bid.
Can anyone here please tell me what these companies see in MEN, at a price of approx $810Million, to extend this bidding war, comment below.
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