To integrate the potential acquisition, Ciena would have to swallow a unit that earned $1.36 billion in 2008 revenue -- higher than the $902.4 million it earned in the same period.

In a Nov. 19 research note, UBS analyst Nikos Theodosopoulos wrote that Ciena would have to raise its offer, but if the price for the assets escalates above $750 million during the auction, Ciena is likely to walk away.

With total cash and securities of just over $1 billion and $798 million of debt on its balance sheet, according to regulatory filings, Ciena could find it difficult to keep raising its bid.

Its latest offer includes the issue of $214 million in debt in the form of convertible notes. The interest rate for the senior notes, due June 15, 2017, is 6 percent, one of the sources said. Under the terms, the interest rate would increase gradually to 8 percent if Ciena's share price falls, this person said.

Ciena's offer values the unit at around 0.6 times annual sales, which is a "fair price" compared to the multiples paid for other Nortel assets, said Earl Lum, president of EJL Wireless, a wireless infrastructure research firm.

He added that a multiple of 0.8 times sales "would be a pretty good premium to the market," indicating that Nokia Siemens and One Equity, which manages $8 billion in investments for JPMorgan could yet come in with a higher bid.

Winning these Nortel assets would help Nokia Siemens, a 50-50 joint venture of Nokia and Siemens AG, expand its U.S. presence. The company has said North America along with India, Japan and China, are its four top growth targets.