Shares of fiber optic-networking equipment vendor Infinera (INFN) are up 55 cents, or almost 3%, at $19.98, after the company this morning announced an offer to buy Sweden’s Transmode AB (TRMO)  for $350 million in cash and stock to expand the breadth of offerings.

The deal includes Kr300 per Transmode share, or $34.30, in cash, plus 4.705 Infinera shares, worth $94.47, or $128.77 in total, above Transmode’s closing price yesterday of Kr96.50.

Infinera stock today is up 64 cents, over 3%, at $20.07, while Transmode is up $15.75, or 16%, at Kr112.25. Shares of Infinera’s U.S. fiber optics competitor, Ciena (CIEN), are up 31 cents, or 1.6%, at $19.92.

The deal moves Infinera from serving just the coast-to-coast routes of telecom networks to competing in the metro urban markets.

Infinera said the deal will complement the company’s “long-haul” fiber optics transmission equipment with a “suite of metro core, edge and access solutions.”

J.P. Morgan’s Rod Hall, reiterating an Overweight rating on Infinera stock, notes that this expands Infinera’s market more than would have Infinera’s own product for metro:

Infinera said it believes the metro core and metro access markets combined were $5.5bn in 2014 vs. Dell’Oro’s estimate of $4.9bn. We believe INFN was set to address the high end of the metro market with a PIC based product later this year. However, Transmode adds an optical aggregation capability that management believes represents 75%-80% of the metro market.

UBS’s Amitabh Passi, who has a Buy rating on Ciena, and a $25 price target, argues this will have little impact on Ciena, which has already had a broad portfolio spanning both long-haul and metro:

Transmode generates 82%/14% of its sales from EMEA/Americas. Given little overlap, we see limited implications for Ciena from this deal. Infinera, however, generates 76%/20% sales in the America/EMEA. We believe the acquisition is aimed at helping Infinera better compete in Europe, where Ciena has been seeing increasing momentum with the likes of Liberty Global and Vodafone. While Infinera’s products predominantly (98%) address the long-haul market, Transmode is entirely aimed at the metro market.

 

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