Ciena has agreed to acquire World Wide Packets in a deal, valued at about $290 million, that will bring together two players in the growing carrier Ethernet market.

The vendor of carrier gear will pay about $200 million cash plus 3.4 million shares for privately held World Wide Packets, which makes switches and software for Ethernet services offered by carriers. World Wide Packets, in Spokane Valley, Wash., will be merged into a wholly owned subsidiary of Ciena.

Carriers are beginning to build Ethernet networks across metropolitan areas so that they can be more flexible in offering different speeds of service and deliver WAN connectivity with the same technology most enterprises use for their LANs. Ethernet, which generally costs less than traditional metropolitan fiber networks, can also be used for wholesale data transport and backhaul of traffic from wireless networks to the Internet.

World Wide Packets has more than 100 customers in 25 countries and has shipped more than 70,000 units of its products, according to Ciena. The company offers a common operating system across its products, called LightningEdge Operating System, and network management tools.

Also on Tuesday, Ciena said it had won a multiyear contract to supply AT&T with platforms from World Wide Packets.

Based on the $26.52 closing price of Ciena's stock last Friday, the 3.4 million shares are worth about $90 million. Ciena will also assume as much as $15 million of the acquired company's debt. The acquisition requires regulatory approval and is expected to close in the second quarter of Ciena's 2008 fiscal year, which will end in April. World Wide Packets will keep operating from its locations in Spokane Valley and San Jose, Calif. Ciena is based in Linthicum, Md.

World Wide Packets had revenue of about $30 million in 2007, Ciena executives said on a conference call following the announcement. The company has 145 employees, most of them engineers, and Ciena is making arrangements to hold on to those workers, they said.

The product portfolio will let Ciena address everything from small offices to multitenant buildings, said Ciena CTO Stephen Alexander.

World Wide Packets has distinguished itself from other carrier Ethernet vendors by working out operational management and provisioning issues, Alexander said. Traditional Ethernet troubleshooting involves IT managers walking around a LAN and looking for problems, which isn't possible on a carrier network. World Wide Packets has cracked the problem of how to remotely provision Ethernet services and diagnose problems, he said.