Ciena’s ONI Buy Ends Up Costing A Bit More

By the time Ciena closed on its acquisition of ONI Systems
(formerly Optical Networks Inc.) last June, the Linthicum, Md.-based telecom
equipment vendor ended up paying only half of what the deal was originally
valued because of the depressed state of the telecom sector.

But as it turned out, Ciena will now have to pay $25 million more for
that acquisition.

Ciena announced
plans to buy San Jose, Calif.-based ONI in February 2002. At that point, the
stock-swap transaction was valued at $900 million. But by the time shareholders approved the transaction, the deal’s value had dropped to $400
million.

But ONI Systems had also been locked into litigation with Toronto-based
Nortel Networks since March 2000. Nortel, which had well-publicized troubles
of its own after the telecom meltdown, sued ONI for patent infringement and
misappropriation of trade secrets.

On Thursday, in an effort to put its past behind them, Ciena settled the
case offering to make a one-time payment of $25 million to Nortel. As part
of the settlement, Ciena has also licensed certain patents from Nortel.

In turn, Nortel Networks has also agreed to dismiss without prejudice the
patent infringement lawsuit it brought against Ciena in November of 2002 in
the United States District Court, Eastern District of Texas. Nortel
and Ciena have agreed not to sue each other for patent infringement for two
years, during which time they will seek to negotiate a cross-license
arrangement between them.