It will be interesting to see how much Nortel will get for its optical and Ethernet assets in the wake of Ciena’s $521-million “stalking horse” bid. Given what happened during the auctions for Nortel’s CDMA and enterprise assets, it’s entirely possible the optical and Ethernet assets could fetch $1-billion or more.
A key question will be how high Ciena is willing to go. With $455.7 million of cash and $607-million of short-term investments on its books, Ciena appears to have the financial flexibility to make a significantly higher bid.
The company’s ability to use stock as part of the package could also be an important consideration. In a Barron’s story, Morgan Keegan analyst Simon Leopold said Ciena shares could jump as higher as US$24.50 next year (currently trading at US$12.84) because a deal with Nortel would make Ciena the third leading player in the optical switch market, and give the business greater scale.
I have a question about what Nortel would do with these shares.
If there is going to be no remnant of Nortel, how are these shares going to be monetized for the creditors? If millions of shares are placed on the market at once, then the Ciena share price will collapse.
I can only think that an arrangement would be made for a hedge fund or similar body to buy a large stake in Ciena for the price of these shares. Could this be the real deal here? A hedge fund is behind the deal using Ciena as a beard? Why would such a thing be done?
gone2moro
A bushel and a peck.
fishymcdonk
I think MEN will eventually go for over 1 bagillion dollars.
mtvessel
I have a question about what Nortel would do with these shares.
If there is going to be no remnant of Nortel, how are these shares going to be monetized for the creditors? If millions of shares are placed on the market at once, then the Ciena share price will collapse.
I can only think that an arrangement would be made for a hedge fund or similar body to buy a large stake in Ciena for the price of these shares. Could this be the real deal here? A hedge fund is behind the deal using Ciena as a beard? Why would such a thing be done?
protosphere
"Leopold said Ciena shares could jump as higher as US$24.50 next year (currently trading at US$12.84) because a deal with Nortel would make Ciena the third leading player in the optical switch market"
Analyzing Nortel dejas vous with Strong Buys and Holds over the last few years before zero.
CIEN stock was over $15 at end of Sept and around $13 something today. It dropped after the news of buying MENs.
Analysts seem to be out to lunch when forecasting telecom, an already hard hit merging market that is becoming increasingly competitive with fewer /merged customers and lower prices /declining margins.
Excluding Huawei perhaps who seems to be doing well with low prices and soaring sales.
guestfromnt
Not sure if Ciena can manage this deal at all: - They have 800 M $ of debt (compare to 2008 revenue of 900 M$) - They need ~ 200 M$ per quarter just to run their own business - They will need extra ~ 180 M $ for Nortel integration - As they offer "new" shares for MEN it is effectivly dilute the share price
protosphere
Nortel bought PEC's growing revenues amid declining earnings for $448M when it became worth less than half so shortly thereafter. Acts of desperation in wild gamble for all the good it did them.
They also bought BSNL revenues at a loss. Again, what good are revenues if they cost big money. Paying big money to lose big money just doesn't make cents when the odds are against them, hardly a gamble for all the good greater revenues do them. In Notell's case, declining revenues too.
Look at the other players that were looking to buy Nortel assets like Avaya and Seimens when their cash, books, and financials indicate these are just wild gambles, ill afforded acts of desperation during hard times that Nortel followed if any lessons are to be learned from acquiring markets or technologies with the aspiration to grow or profit.
Only Ericsson could afford to gamble and I hardly think dying CDMA and short developed LTE is of that great a bonanza for them.
Perhaps the last of their assets in LG and their patents may fetch something further to appease growing creditors.
Will we also learn what NoTell agreed to paying the taxman today or will this be black out too as untransparent contradicting bonus happy Nortanic liquidates into oblivion.
GoProto
I heard that the IRS/NT resolution is about nothing more than stating that Avaya will not be held responsible in any way and the tax issue will not affect their agreement to purchase Enterprise. It also said that Nortel after stating weeks ago that they did not owe anything in back taxes, their tune has changed to this: "The documents say Nortel has agreed that it will owe the IRS a minimum claim of at least $9.8 million US after its final tax liability was determined"
How Much Will Nortel Get for Optical Assets?
It will be interesting to see how much Nortel will get for its optical and Ethernet assets in the wake of Ciena’s $521-million “stalking horse” bid. Given what happened during the auctions for Nortel’s CDMA and enterprise assets, it’s entirely possible the optical and Ethernet assets could fetch $1-billion or more.
A key question will be how high Ciena is willing to go. With $455.7 million of cash and $607-million of short-term investments on its books, Ciena appears to have the financial flexibility to make a significantly higher bid.
The company’s ability to use stock as part of the package could also be an important consideration. In a Barron’s story, Morgan Keegan analyst Simon Leopold said Ciena shares could jump as higher as US$24.50 next year (currently trading at US$12.84) because a deal with Nortel would make Ciena the third leading player in the optical switch market, and give the business greater scale.
Source: Reuters