Lucent ( LU) emerged as the surprise victor in bidding for the assets of Riverstone Networks, which filed chapter 11 bankruptcy last month.

Riverstone said late Tuesday that Lucent's $207 million cash offer prevailed in the auction, which had also included a bid from Sweden's Ericsson ( ERICY). Ericsson's last bid was pegged at $178 million.

Riverstone started soliciting interest in its networking assets after Lucent made a $170 million offer last month. Lucent's new bid, which includes other changes to its initial one, is subject to final approval by a bankruptcy court judge.

Said Lucent, "We are pleased to have won the auction for Riverstone Networks' assets, and look forward to receiving the final court approval and other clearances that will allow us to begin the integration process. Riverstone's people and products will play an important role in advancing Lucent's end-to-end converged Ethernet/optical solutions and helping us in our efforts to take share of a growing Ethernet carrier market."

Observers say the recent spate of phone company mergers has reduced the number of customers that equipment suppliers such as Lucent and arch-rival Nortel ( NT) can sell to.

Lucent shares closed at $2.80 Tuesday.