Ciena Corp will buy the optical networking and carrier ethernet business of bankrupt Nortel for $769 million after it trumped Nokia Siemens Networks in a three-day auction.

The deal will more than double Ciena's turnover, prompting the market to focus on how the U.S. network equipment maker will integrate the new operations and cope with an increased debt load.

Ciena confirmed on Monday details of the deal that sources told Reuters on Sunday.

Ciena's winning offer consists of $530 million in cash and $239 million in 6 percent senior convertible notes due 2017.

The final bid by rival Nokia Siemens, which had teamed with private equity firm One Equity Partners, came very close to Ciena's offer, a source close to the deal said.

Nokia Siemens Networks believes that its final offer represented fair value for the assets, and further bidding could not be financially justified, it said in a statement.

Shares in Ciena traded in Frankfurt were 2.6 percent lower at 8.67 euros at 7:26 a.m. EST (1226 GMT), compared with a 0.7 percent stronger DJ Stoxx European technology shares index. Nokia's stock was 0.5 percent firmer.

Last month Ciena made a stalking-horse offer for these assets of Nortel Networks Corp, the Canada-based telecommunications company that filed for bankruptcy in January and has been auctioning off assets.

That bid set a floor price, but Nortel was free to seek higher offers.

Ciena initially offered $390 million in cash and 10 million shares, for a total deal value of $522 million based on Friday's closing price of Ciena stock.

A BIG DEAL TO DIGEST

For Ciena, the purchase of these core assets in Nortel's Metro Ethernet Networks business is an opportunity to increase sales.

Uniting our two optical businesses is a game changing event for the optical industry, Philippe Morin, head of Metro Ethernet Networks, said in a statement.

The equipment manufactured by these companies is used to build the Internet infrastructure that supports corporate and residential networks.

Ciena said it expected the transaction to be significantly accretive to its results from operations in fiscal 2011.

But analysts and investors have been concerned that the deal will weigh down Ciena's operations, hurting the U.S. company's shares in recent weeks. Ciena will have to swallow a business with annual revenues of $1.36 billion -- higher than the $902 million it earned in the same period.

Ciena had total cash and securities of just over $1 billion and $798 million of debt on its balance sheet at end-July, according to regulatory filings.

HEADACHE FOR NOKIA SIEMENS

Nokia Siemens -- which is struggling to make a profit and faces aggressive rivalry from Huawei -- was looking to strengthen its position in North America. It made revenues of just 127 million euros ($189.6 million) there in the September quarter, less than 5 percent of the group total.

Nokia Siemens, a 50-50 joint venture of Nokia and Siemens AG , lost a similar auction in July, when bigger rival Ericsson snapped up Nortel's CDMA assets. This was also an attempt to boost its presence in North America, one of its top four growth targets, along with India, Japan and China.

Nokia Siemens should fix its market share in the United States. An acquisition would be the fastest solution for that, but integrations are costly and the company is in the midst of restructuring anyway, said Pohjola analyst Hannu Rauhala.

Nortel has yet to sell its assets related to GSM and GSM-R technologies, which could also interest Nokia Siemens, analysts said.

($1=.6697 Euro)

(Editing by John Stonestreet and Jon Loades-Carter)

Canada Electronics