NSN sniffing around Ciena?

I’ve been following this acquisition for awhile now and it’s starting to look like a “lovers trio” daytime drama plot.

Nokia siemens Networks

Ciena

Nortel

The rumor mill is ripe with news that Nokia Siemens Networks (NSN) still hasn’t given up on the Nortel MEN assets even if it means buying Ciena to get them.  Let’s break this down:

• Ciena’s financial position was $1.07 Bio in Cash and roughly $800Mio in Debt
• Nortel MEN revenues are(were) expected to be around $1.3 Bio. in 2009
• Ciena purchased Nortel’s MEN business for $530 Mio. in cash and $239 Mio in Convertible notes
• Ciena, post acquisition has (roughly) $1.3 Bio in debt and $500Mio in cash on hand, and…..
• An Integration challenge that will last at least 18 months

I’m no financial wizard but it seems to me that Ciena’s debt would make anyone think twice about acquiring them unless the entire deal could be made with a stock swap.  We also have to remember that NSN has some big pockets behind them in the form of Siemens and Nokia who might cough up what it takes for this purchase to go through if it means they can finally ensure NSN profitability.

Aside from the financials, I don’t see the gaping holes in NSN’s product offering that would drive them to look at Ciena (or MEN for that matter).  With the in house Ethernet and Optical equipment and the A-Series JV with Juniper Networks, I can only see potential software gaps rather than hardware.

With the current debt load and the integration challenge of the combined Nortel/Ciena companies, NSN would be in for a heck of a ride….

Tagged as: Ciena, Mergers and Acquisitions, Nortel, NSN