Ciena Corp. (s CIEN), the Linthicum, Md.-based optical equipment maker, today announced that it’s in advanced discussions to acquire substantially all of the optical networking and carrier Ethernet assets of Nortel’s (s nt) Metro Ethernet Networks (MEN) business. Nortel, which has been selling off its various divisions, first announced its decision to sell its optical business last September. It’s still unclear how much Ciena would pay for these assets. Nikos Theodosopoulos, an analyst with UBS Research, estimates that Nortel could get about $500 million for them.
There’s a good chance that Nortel can negotiate an even higher price. Why? First of all, Ciena needs Nortel’s equipment to further mine the 40G optical cycle. Ciena has bet big on the 100G deployments, which are still taking some time to kick off. If Ciena does indeed get Nortel’s optical business, it could use that to become a bigger supplier to AT&T (s T). In addition to Ciena, Ericsson (s ericy) and Nokia (s nok) Siemens Networks could also be bidders for Nortel’s optical business.