Tuesday 19 March 2024
 
»
 
»
Story

Nortel agrees to sell enterprise unit to Avaya

Toronto, July 21, 2009

Bankrupt Nortel Networks, a top global technology company, has said that it has agreed to sell its enterprise unit, which builds networks for companies, to Avaya, a leader in business communications, for $475 million.

The company also said higher bids may emerge.

The company, which in its heyday employed more than 90,000 people and could sway entire stock markets in Toronto and New York with just a blip in its share price, also plans to sell its third remaining unit before the end of the quarter, the final chapter for what was once a Canadian icon.

"With the announcement today, we have stalking horse agreements for the two largest businesses within Nortel and we are acting with a great level of speed and resolve to be able to conclude all of the other stalking horse agreements," said Nortel president and chief executive Mike Zafirovski.

"I believe that many of those will be completed and announced before this quarter is over."

Stalking horse deals are designed to test the market, typically setting the floor for bidding, and make up the lead bid at a bankruptcy auction.

"We certainly believe there are a number of other interested parties that will take advantage of the stalking horse process to come in and bid for these assets," Zafirovski added.

Toronto-based Nortel, North America's biggest maker of telephone equipment, now employs some 30,000 workers and has been in steady decline for much of the past decade.

The company filed for bankruptcy protection in Canada and the United States in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.

In June, Nortel announced a stalking horse deal to sell its CDMA and LTE wireless technology businesses to Nokia Siemens Networks for $650 million.

The proposed asset sale to Avaya will include all the assets of the enterprise business, as well as the shares of Nortel Government Solutions Inc and DiamondWare.

Nortel's operations are approximately divided between the wireless business, the enterprise unit and the Metro Ethernet Networks unit, which makes Internet infrastructure and includes its optical and carrier ethernet technology.

Avaya Inc specializes in equipment and services that help business customers make phone calls over Web-based networks.

The company was bought out by private equity firm Silver Lake, and TPG Capital, in October 2007.

Analysts said the proposed deal is good news for both the industry and Avaya as it boosts Avaya to the top spot in the expanding voice over Internet protocol (VoIP) market.

"This new market share helps Avaya tremendously as it has been able to convert its own customer base to VoIP but had trouble acquiring new customers," said Yankee Group analyst Zeus Kerravala.

Bidding war?

Nortel is to file the enterprise unit stalking horse asset and share sale agreement with the US bankruptcy court for the district of Delaware, setting in motion the process that will allow other parties to bid for the assets.

Separately, interested parties are to submit bids for Nortel's wireless technology business on Tuesday for an auction on Friday, when Zafirovski said new bidders may appear.

"A stalking horse in itself does not entail the final transaction and we are looking forward to a very active bidding process for CDMA and LTE over the next few days," he said.

Analysts say Nortel's assets are worth more individually, as long as they are sold soon enough to assure the market they are in the hands of sustainable companies.

"I would expect that Nokia Siemens and Avaya are both trying to get a bargain in the process, but considering the stakes here ... I expect additional offers to come and I would expect Nokia Siemens and Avaya to match or increase whatever subsequent offers come along," said Carmi Levy, an independent technology analyst based in London, Ontario.




Tags: Avaya | Enterprise | Nortel | bankrupt | Toronto |

More INTERNATIONAL BUSINESS Stories

calendarCalendar of Events

Ads