March 13 (Bloomberg) -- Ciena Corp. is considering the purchase of a unit from Nortel Networks Corp., the Canadian phone-equipment maker that filed for bankruptcy protection in January, according to a person familiar with the matter.

Nortel’s Metro Ethernet Networks unit may be valued at about $300 million, said the person, who asked not to be named because the negotiations are confidential. Lazard Ltd. is handling a possible sale of Nortel’s assets, and information about the company will be made available to prospective buyers next week, according to another person close to the matter.

Ciena, which makes fiber-optic network gear that provides faster data-download speeds, has struggled to reverse sales declines for the past two quarters as carriers scaled back network upgrades amid a worsening recession. Buying the Nortel division would give Ciena more products that carriers can use to transmit video and other Internet traffic within cities.

“They need to get bigger or they’re in trouble,” Samuel Wilson, an analyst at JMP Securities LLC, said in an interview from San Francisco. “It’s feast or famine for Ciena. This will help them smooth out customers’ buying patterns.” Wilson rates the shares “market perform” and said he doesn’t own them.

Ciena, based in Linthicum, Maryland, said last week it had $922.6 million in cash and marketable securities at the end of January, down 22 percent from a year earlier.

Ciena spokesman Darren Brandt and Nortel representative Mo Nakhooda said their companies won’t comment on speculation. Nortel is still working on its strategy after filing for bankruptcy protection in January, Nakhooda said.

Other Assets

Nortel put the ethernet unit up for sale in September and suspended those plans after its bankruptcy filing. The company has lost almost $7 billion in the past two years as customers fled to competitors such as Cisco Systems Inc. seeking products that use newer technology.

Nortel is in talks to sell other assets to rivals, according to people close to the situation. Siemens Enterprise Communications is weighing a bid for the unit that builds communication networks for companies, while Nokia Siemens Networks is looking at the division that makes wireless voice gear.

Ciena fell 38 cents, or 5.2 percent, to $6.90 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have advanced 3 percent this year before today. Nortel fell 1 cent to 8.5 Canadian cents on the Toronto Stock Exchange.

Carriers that have cut capital spending and delayed projects because of the recession will have to pick up purchases to handle rising Web traffic, Ciena Chief Executive Officer Gary Smith said in an interview this month.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Rochelle Garner in San Francisco at rgarner4@bloomberg.net.

Last Updated: March 13, 2009 16:02 EDT