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Dino DiPerna, VP of Transport and Switching R&D at Ciena, led the crew that saved Nortel's optical community. Julie Oliver / Ottawa Citizen
at the time, it gave the impression the realm changed into ending.
Lehman Brothers’ investment financial institution had filed for bankruptcy on Sept. 15, 2008, triggering a worldwide financial disaster. The next night, Dino DiPerna – the head of R&D for Nortel Networks’ optical networks neighborhood – became attempting to calm down in his Boston resort room when he acquired a call from his boss, Philippe Morin. one other shock. Morin advised his colleague their neighborhood could be put up on the market the following morning.
DiPerna — a long-serving veteran of this unforgiving industry – knew there would be fallout, a lot of it. indeed, Nortel’s competitors misplaced no time spreading vicious gossip in regards to the weaknesses inside. They claimed Nortel’s optical enterprise had been starved of substances, its engineering skill drained away. These and other rumours extended in January 2009 when Nortel sought the insurance plan of bankruptcy court.
DiPerna knew the gossip, most of it, wasn’t actual. however to persuade Nortel’s valued clientele, he and his colleagues logged hundreds of heaps of miles to reassure them in person. a further equally vital mission changed into to stay away from rivals from poaching Nortel’s most beneficial engineers.
“I’m proud to assert they bought only a few of our people within the end,” DiPerna says. “we've a culture of sticking it out through complicated times, a belief in ourselves, in our capability to innovate.”
The stretch of giant uncertainty produced an surprising improvement.
“It become us in opposition t each person,” DiPerna provides, “and it made us stronger.”
more to the factor, DiPerna’s optical products group – called Metro Ethernet Networks – grew to become a extremely sought property.
On March 19, 2010 – more than a yr into Nortel’s gut-wrenching chapter – Maryland-primarily based Ciena shelled out $774 million US to purchase the Metro Ethernet Networks unit.
The minute it did, the business gossip stopped and a gruelling multi-12 months integration of both companies begun.connected
Now, at last, the payoff is clear.
For the past 12 months, Kanata commuters were handled to the rare sight of a major new high-tech campus below development along Terry Fox power simply west of March highway.
Ciena employees are relocating in waves from Nortel’s longtime base at Carling Avenue and Moodie force in the west conclusion of Ottawa. the first group is filling an adjoining a hundred and seventy,600 square-foot facility at 5050 Innovation Dr. prior to now constructed by way of BlackBerry but on no account occupied. beginning in January, the leisure of the Ciena worker's will movement into two new towers on Terry Fox force — comprising an further 254,300 square toes of leased house.
by the point the brand new Ciena undertaking is accomplished, without doubt in September 2017, the cluster will residence about 1,600 personnel — confirming the company’s repute because the place’s second-largest know-how supplier after Nokia.
more vital than the size of the Ciena campus is its function: a majority of the company’s international R&D is achieved right here. And when it involves optical know-how — the excessive-pace core of these days’s cyber web — Ciena is the No. 2 business enterprise on earth at the back of China’s Huawei, and No. 1 in North the united states.
“It become the deal of a lifetime,” says James Frodsham, Ciena’s chief strategy officer — and the guy in can charge of buying different firms.
but it surely took much more than one harmful bet to make this combo work. It required a collection of them – through Ciena and Nortel alike. here is the story of how they did it.
in case you need to take into account why Ciena survived and Nortel didn't, the most suitable starting aspect is February 2001 – the month the telecom trade’s foundations cracked. On Feb. 9, Ciena achieved the sale of convertible debt and eleven million shares for a web payoff of $1.6 billion US. The Maryland company bought in only beneath the wire. Six days later, Nortel published its revenues would gradual — the primary of many such bulletins that year.
by the end of 2001, Nortel would checklist annual sales of simply $17 billion compared to its usual forecast of $forty billion. with no conclusion in sight to the sales slide or the multi-billion dollar annual losses, Nortel now not had the choice of shoring up its stability sheet via issuing shares to traders. no person turned into interested.
Former Nortel Campus on Moodie Dr. Chris Mikula / Ottawa Citizen
The enterprise’s failure to promote shares when it became flying excessive would depart it fatally inclined right through the 2008-09 global economic crisis.
It become a lots distinct condition at cash-prosperous Ciena, which in 2001 had the flexibleness to be creative. The business reached that position no longer because it became extraordinarily prescient — infrequently any individual in the industry saw what changed into coming that year. however, Ciena best had round six years of operations below its belt on the time. It changed into very much a startup, and extremely aware of the deserve to lift funds when conditions permitted. And so it did.
From 2001 to 2004 — the telecom business’s “nuclear wintry weather” — Ciena shelled out more than $2 billion to acquire five networking know-how experts, including Akara and Catena Networks from Ottawa. via these purchases, Ciena significantly broadened its product traces.
“if you happen to get these durations of exceptional uncertainty, risk and dislocation, it’s an opportunity to trade the online game,” Ciena CEO Gary Smith says. “We positioned some very giant bets but i might say they have been calculated.”
At Nortel’s Metro Ethernet Networks unit, equally large risks had been being meditated. however these have been triggered by desperation rather than possibility.
Nortel shoppers akin to Qwest Communications and Verizon significantly pared lower back orders for communications equipment starting in 2001. That’s when DiPerna and his engineering crew knew that they had a big issue — rather apart from the loss of revenues.
The difficulty turned into charge: their products were costly to supply, something that hadn’t mattered all over the telecom increase. but now it did.
Nortel had won the late Nineteen Nineties global race to produce an optical transmission technology in a position to pushing statistics during the information superhighway at speeds of 10 billion bits per 2d (10 gigabits). Bumping up the velocity in subsequent-generation techniques (forty gigabits) down a similar direction of technology would require the use of greater-satisfactory optical fibre and costly pieces of apparatus to regenerate alerts.
now not handiest had been purchasers now unwilling to pay for these technical enhancements, they nonetheless wanted greater speeds to be able to accommodate the turning out to be use of on-line video and different digital traffic.
DiPerna and his team spent months brainstorming together with specialists in instant expertise and electro-optical devices. They reached a fateful conclusion. in preference to drive valued clientele so as to add costly new optical techniques, they would create expertise for extensively expanding the capability of latest optical fibre — whatever that demanded varied technical breakthroughs. The group wasn’t bound it may well be accomplished.
The engineers shrank analog-to-digital converters and utilized digital sign processing in wonderful techniques. They used these building blocks to design a brand new forty-gigabit chip, which they unveiled in 2005 and began trying out it here yr. This, in flip, fashioned the heart of the forty-gigabit optical system — which Nortel introduced in March 2008. That was just six months earlier than DiPerna discovered Nortel would put his Metro Ethernet Networks unit up on the market.
nonetheless it become adequate. the brand new forty-gigabit system — dubbed digital coherent optical — turned into fitting the trade’s new average for sending facts alongside the web’s spine. “We wager every little thing on coherent,” says DiPerna, “That’s what stored us going during the 2000s.”
ownership would soon flow from Nortel. however the first rate information turned into digital coherent technology gave the Metro Ethernet Networks unit some precise cost.
Ciena was one of the most first abilities patrons to specific pastime in purchasing it.
“We’d been trying to find a long time at Metro Ethernet, specifically a technology called coherent,” Ciena’s Gary Smith says. “These guys were manner ahead of us.”
Ciena CEO, Gary Smith, gives a presentation on the convergence of Nortel and Ciena to former Nortel employees from Ottawa and Montreal in 2010. THE OTTAWA CITIZEN
James Frodsham — a Ciena govt on account that 2005 and a former Nortel supervisor — led the examination of Metro Ethernet Networks. He became generic with Nortel’s optical technology team and knew what they were in a position to doing. What neither he nor his boss Smith may be certain about became the first-class of Nortel’s product line. When Nortel become losing buckets of funds all the way through the telecom crash, just how tons cash had been withheld from R&D? And which projects had been hurt probably the most?
here's what they found: “Philippe and Dino had to a superb extent covered the assets and the group from frankly all the trauma and mismanagement at the true in the broader Nortel,” Smith says. “they'd managed to shoestring investments together and kept the skill. It was a large shock.”
DiPerna’s big worry become that Metro Ethernet Networks would be sold to a company involved only in elements of the product portfolio — ensuing in the breakup of the unit and its 2,000 plus employees. one more negative result, as a minimum from his element of view, would have seen Nortel’s optical neighborhood disappear into the underbelly of a large multinational.
“If we’d been bought by means of a big business like Ericsson, Alcatel-Lucent or NSN (Nokia Siemens Networks), we would were just an insignificant part of a huge desktop,” DiPerna observes. “That’s no longer who we're.”
When Ciena prevailed in the bidding for Metro Ethernet Networks in 2010, DiPerna’s issues weren’t wholly allayed. before the telecom crash, Nortel and Ciena had competed at once in selling optical systems. What if Ciena turned into buying Metro Ethernet Networks readily to strip it of expertise then shut it down?
Smith and Frodsham quickly reassured him. all through the nuclear winter both organizations had concentrated on very different elements of the optical expertise puzzle. whereas Nortel had targeting core, lengthy-haul optical systems, Ciena had received lots of the other pieces linked to high-velocity networking. whereas there was nonetheless some overlap, the groups complemented every different greater than Diperna had anticipated.
James Frodsham, Senior VP and Chief method Officer of Ciena speaks on the authentic floor breaking of the new Ciena buildings in Kanata North in 2015. Jean Levac / Ottawa Citizen
This meant merging the firms’ operations turned into a bit of less complicated than it could had been, but the costs — and risks — have been nevertheless colossal. Ciena estimates it spent basically $200 million on integration and restructuring fees starting from consulting fees to severance costs.
Nor changed into the economy potent. Ciena’s revenues in 2009 had slipped to $653 million from $902 million the outdated yr and have been getting better slowly. The loss in 2009 had topped $580 million compared to a old 12 months earnings of $39 million.
“The economic backdrop turned into pretty tepid,” Smith says, “so it took us a bit longer than our preliminary plan referred to as for” to make the purchase of Metro Ethernet repay.
indeed, Ciena lost cash for six straight years except 2015 when, at last, the company posted a small income of $12 million on sales of $2.4 billion. but the pieces are eventually falling into region.
along with its acquisition remaining 12 months of Cyan — a California-based mostly networking utility professional — Ciena’s items these days direct site visitors alongside the information superhighway’s densest routes. A consensus forecast prepared through Thomson Reuters suggests Ciena’s revenues will develop practically seven per cent this yr and 15 per cent in 2017 to attain an estimated $three billion, paced by using accelerated orders for quicker optical apparatus and linked software.
As Ciena continues acquiring other companies, the relative contribution of the business’s 1,600 Kanata employees will reduce a bit. As of remaining October, the company employed 5,345 globally compared to four,300 in 2011. even so, there's little denying the significance of the Canadians inside the employer.
The old Ciena and Nortel product traces have converged and the enterprise’s engineers are busy collectively reinventing networking know-how in optical methods, utility and functions. The company claims 70 per cent of its patents filed due to the fact it received Nortel’s Metro Ethernet Networks unit include at least one Canadian inventor.
Ciena apparatus is now processing video and statistics through optical fibre at speeds of four hundred billions bits per 2nd — in reside networks the existing state of the art is 200 gigabits.
“In hard instances we needed to pick and judge what we focused on,” says DiPerna, “but we not ever took our eye off innovation.”connected
In Ciena, he found an organization that has for sixteen years maneuvered efficaciously through the publish-telecom crash and a global fiscal disaster — transitions that Nortel failed. He additionally found a firm inclined to collaborate with his engineers, and not deal with Kanata like a branch plant R&D shop.
Will the system proceed to work? This area has seen too many impressive screw ups in excessive-tech to reply this definitively. the sector is easily too competitive. “here's now not an business the place you let up,” Frodsham consents.
When the excessive-tech world crashed after 2000, height annual revenue at Ciena slumped from $1.6 billion to under $300 million. At Nortel, revenues within the optical unit collapsed from $10 billion to just $1.5 billion. Losses at both operations have been incredible.
viewed in this gentle, Ciena and Nortel’s optical community beat the chances with no trouble by way of surviving. That they went on to jointly construct a company that claims first or 2nd spot in most of its product lines is all the extra brilliant.
“individuals like clarity when you do these forms of mergers,” says Smith, “We’ve invested closely in R&D and run the company for the long-time period — the consequences have regularly stronger.”
It’s the type of steadiness and faith in the company’s own skill that Nortel’s proper executives had abandoned during their business’s heyday. more challenges loom as Ciena adapts its product lines to more application-intensive networks — greater bendy methods that depend much less on raw hardware.
however this time DiPerna’s engineers are pushing the perimeters of know-how while not having to be troubled whether their enterprise is about to implode. It’s a world of difference from simply a few years in the past.
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Ciena’s trail of acquisitions when you consider that the 2001 telecom crash:
2002: ONI methods of California for $398M
2003: Wavesmith Networks of California for $178M
2003: Akara of Ottawa for $46M
2004: Catena Networks of Ottawa for $314M
2004: cyber web Photonics of Massachusetts for $100M
2008: around the globe Packets of California for $296M
2010: Nortel’s optical products unit of Ottawa and Montreal for $774M
2015: Cyan of California for $415M
a short history of Nortel’s optical products unit
1989: Nortel launches Fibre World – its intention to build a family unit of optical transmission items
1993: Nortel offers the go-forward for OC-192, which transmits information at 10 billion bits per second
1995: Secures initial order of OC-192 from MCI Communications
1996: First year of huge shipments for OC-192
Late Nineteen Nineties: Upstart carriers including Worldcom and Qwest Communications location gigantic orders
2000: Nortel earnings of fibre-optic items hit $10 billion – one-third of enterprise revenues – making it the globe’s No. 1 enterprise
2001: Telecom trade crashes as weakening stock market deprives carriers of an immense source of money. Nortel begins its ancient downsizing
2001: Nortel’s optical products unit – which would develop into known as Metro Ethernet Networks – begins work on a novel way to enhance the speed of information devoid of forcing carriers to deploy new methods. The expertise is dubbed “coherent optical”
2005-06: Nortel engineers unveil new chips to achieve this
March 12, 2008: Nortel unveils industry’s first coherent technology equipment, to run at 40 billion bits per 2d
Sept. 17, 2008: Nortel publicizes Metro Ethernet Networks may be bought to lift money for the rest of the enterprise
Jan. 14, 2009: Nortel info for bankruptcy protection, and shortly offers all its enterprise units on the market
March 19, 2010: Ciena pays $774 million to purchase Nortel’s optical items unit
2015: building starts off on a new campus in Kanata to condo 1,600 employees, most of them formerly with Nortel
2017: New Ciena campus is expected to be accomplished, and should manipulate nearly all of the firm’s international R&D
Marco Pagani has recently served as Chairman of the Board of directors at a few telecom high-tech businesses, together with Nimcat Networks, the place he helped steer the business against its eventual acquisition via Avaya in 2005. ahead of his current work as an govt advisor, Mr. Pagani served in an illustrious profession at Nortel Networks over a 20-year duration. His most contemporary position at Nortel became President of Optical Ethernet and Storage options, in which his leadership fueled the division's rapid boom. in the past he held numerous senior positions, including President - Metro Optical Division, President - Core Networks, and typical supervisor - carrier records Networks, where his leadership abilities drove Nortel to a place of market management.
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October 08, 2009|via Lorraine Mirabella | Lorraine Mirabella,email@example.com
Ciena Corp.'s offer to acquire Nortel Networks Corp.'s optical networking company for $521 million would create the largest maker of community device in North america and position the technology company to compete extra comfortably on a worldwide scale, experts spoke of Wednesday.
Ciena, based in Linthicum, observed Wednesday it has signed agreements to pay $390 million in cash and 10 million shares of Ciena general stock, valued at $131 million according to Tuesday's closing cost, to acquire Toronto-based Nortel's optical networking and service Ethernet property in North the united states, Latin america, the Caribbean and Asia.
Folding in Nortel's enterprise might double Ciena's labor drive and its income. Ciena had annual income of $902 million remaining yr, whereas the Nortel assets to be got generated some $1.36 billion in earnings remaining year and $556 million within the first six months of 2009.
both groups manufacture device that connects communications networks, akin to between cities and countries.
"It expands our consumer base significantly and our geographical reach," referred to Gary Smith, Ciena's president and chief executive officer, in an interview Wednesday. "It deepens our know-how within the identical area we're in and provides a lot of scale for the company in terms of international reach."
Ciena, which employs 2,one hundred ten, including 700 in Maryland, observed it would present jobs to at least 2,000 Nortel personnel, which represents more than eighty five p.c of Nortel's optical networking and Ethernet employees. Smith stated it is just too early to claim if the acquisition would lead to growth in Ciena's Maryland work force.
Nortel has been working below Chapter 11 insurance plan of the U.S. bankruptcy Code since January, when it additionally sought creditor protection below the companies' creditors arrangement Act in Canada.
below bankruptcy rules, Nortel should file its asset sale settlement with the court docket and make a action to establish bidding for an auction that would enable qualified bidders to submit more desirable offers. Nortel will additionally file the same movement with the Ontario superior court docket of Justice. After the bidding system, anticipated to take place in the subsequent couple of months, remaining approval is required of each the U.S. and Canadian courts.
One analyst Wednesday pointed out Ciena is not likely to emerge the successful bidder in what is probably going to be a competitive auction. In different auctions of Nortel groups this yr, profitable bids have come with bigger rate tags than the preliminary "stalking horse" offers.
"I actually consider there should be more bids impending," spoke of Michael Genovese, a important analyst with Soleil Securities in big apple, who spoke of organizations comparable to Cisco programs Inc., Ericsson and Nokia can be probably rivals, "so the expense goes greater, and i do not think Ciena is going to move an awful lot better."
Genovese, who recommends Ciena inventory, talked about the acquisition could be a foul conception for Ciena.
"What's beautiful about Ciena is they have these subsequent-era products ... which are excessive-growth, high-margin products, and that they can increase their fiscal performance simply selling products they have already got," he said, while Nortel has "unattractive legacy know-how with low margins."
but Blair King, a senior analysis analyst with Avondale companions LLC in Nashville, talked about such an acquisition makes feel at what he called a deeply discounted present.
"It sets them up neatly to compete," he talked about. "Having scale will help as they compete for market share."
although, he observed, it is usually a problem to integrate a 2,000-person work drive.
Smith, Ciena's chief executive, talked about the acquisition would enable Ciena to speed up its boom plans with the aid of two to three years.
"Ciena has been one of the crucial quickest-growing to be agencies in our area for the ultimate 4 or 5 years, and we've a robust balance sheet," Smith spoke of. "here is one of these pleasing opportunities, given the chapter, where we will accelerate our method."
He brought that Ciena continues to be in a strong place with or devoid of the acquisition.
The president of Nortel's Metro Ethernet Networks known as the offer a positive step for Nortel's optical networking consumers and personnel.
"The sale of those groups to a strong and stable buyer makes it possible for the innovation of 1 of the most reliable leaders within the optical trade to proceed to thrive," referred to Philippe Morin, of Nortel, in an announcement.
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