Ciena Corp. (CIEN) made a $521 million "stalking horse bid" for Nortel Networks Corp.'s (NRTLQ) optical networking and carrier ethernet assets, putting yet another one of the bankrupt telecommunications vendor's units in play for potential bidders.

Under a stalking horse deal, Ciena was chosen by Nortel out of a blind pool of potential acquirers to place a benchmark bid for Nortel's Metro Ethernet Networks unit - a structure typically used when dealing with a company under bankruptcy protection. While other bidders can jump in, Ciena unveiled the details of the deal and why it makes sense in a show of confidence.

"Sometimes dragging the girl out to the dance floor makes other dudes less inclined," said Mark Sue, an analyst at RBC Capital Markets. "There are other hound dogs sniffing around."

Ciena, based in Linthicum, Md., which disclosed Monday it was in talks with Nortel, said Wednesday that it was offering $390 million in cash and 10 million shares to buy the company.

Ciena, which intends to hire up to 2,000 Nortel workers if the deal goes through, would see its work force nearly double. As of its fiscal third quarter, it employed 2,110 employees. The company sees the two assets fitting together. Both focus on optical equipment and ethernet gear, with Ciena's focus in the metro area and the Nortel asset specializing in the long-distance network. Culturally, some of Ciena's employees previously worked at Nortel.

"We're starting with a good natural fit," Ciena Chief Executive Gary Smith said in an interview with Dow Jones Newswires. "You have the fundamental jigsaw already in place."

Noting that the deal was far from done: "We understand the uncertainty and complexity of the process," he said.

The deal covers substantially all assets of the Optical Networking and Carrier Ethernet businesses globally, its industry-leading 40G/100G technology, and the related services business. It also includes all patents and intellectual property used in the businesses and provides for the transition of substantially all of Nortel's Optical Networking and Carrier Ethernet customer contracts.

Ciena said the assets to be acquired generated about $1.36 billion in revenue for Nortel in 2008 and $556 million in the first six months of 2009. The company plans to incur $180 million in integration costs once the deal closes, and expects the assets to add to earnings by fiscal 2011.

If approved, the deal is expected to close by March.

With the rapid expansion of Ciena's work force, some cuts will eventually be made, Smith said. But executives said it was too early to comment on merger costs reductions.

"The deal is not just about job cuts," Smith said.

Any agreement would have to be approved by the U.S. Bankruptcy Court for the district of Delaware and the Ontario Superior Court of Justice.

Nortel filed for bankruptcy protection in January and has been selling off assets as it works to streamline its structure. Since then, technology companies have swooped in to buy up several of its valuable businesses. Smith said Ciena has been in talks with Nortel for the past 12 months over the assets.

Earlier this year, Avaya Inc. (AV) agreed to pay $915 million for the part of Nortel that sells communications gear to corporations while L.M. Ericsson Telephone Co. (ERIC) bought Nortel's wireless networks business for $1.13 billion.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

(Judy McKinnon contributed to this story.)