Ciena Corp will buy the optical networking and carrier ethernet business of bankrupt Nortel for $769 million, sources told Reuters, 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.

Shares in Ciena traded in Frankfurt were 2.6 percent lower at 8.67 euros at 0921 GMT (4:21 a.m. EST), compared with a 0.7 percent stronger DJ Stoxx European technology shares index. Nokia's stock was 0.2 percent firmer.

Ciena's winning offer consists of $530 million in cash and $239 million in convertible notes, one of the sources said, speaking on condition of anonymity since details of the auction have not been made public.

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

Nokia Siemens -- which is struggling to make a profit and faces an 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 September quarter, less than 5 percent of the group total.

Nokia Siemens lost a similar auction in July, when bigger rival Ericsson outbid it for Nortel's CDMA assets.

The Ciena deal values Nortel's unit at almost 0.8 times annual sales, which gives pretty good premium to the market, said Earl Lum, president of EJL Wireless, a wireless infrastructure research firm.

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.

On November 18, another source familiar with the sale told Reuters that Nokia Siemens and One Equity Partners, which manages $8 billion in investments for JPMorgan, had also jointly bid for the assets.

Ciena and Nortel representatives did not return calls seeking comment.

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.

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

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.

To integrate the unit, Ciena would have to swallow a business with annual revenues of around $1 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.

Winning the auction for these Nortel assets would have helped Nokia Siemens, a 50-50 joint venture of Nokia and Siemens AG, which has said North America is one of its top four growth targets, along with India, Japan and China.

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

(Editing by Gary Crosse, Lincoln Feast, John Stonestreet)

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