The Israeli holding company Koor Industries Ltd. says it's considering selling its share of Telrad Networks Ltd. , a telecom equipment developer and IPTV systems integrator.

Koor says it has "received a number of inquiries from various entities" interested in buying its 61 percent stake in Telrad, and that "initial negotiations" are going on now. A spokesman says Koor isn't divulging the names of the bidders.

The potential sale may be motivated by a recent change in ownership of Koor Industries. The company was taken over by IDB Holding Corp. Ltd. in May for $446 million.

Telrad's main business is developing switching, VOIP, and optical products for other vendors. In fact, some clues to the identities of its potential suitors may be found in Telrad's list of vendor-customers. (See Nortel Pays Back Koor, Telrad.)

Those include such names as Alcatel (NYSE: ALA; Paris: CGEP:PA) and Alvarion Technologies Ltd. (Nasdaq: ALVR), but its closest and longest-standing relationship is with Nortel Networks Ltd. .

Telrad's Nortel business has contributed 53 percent of its revenues so far this year, 69 percent in 2005, and 62 percent in 2004. According to its Website, Telrad "functions as an R&D center for Nortel."

Nortel and Telrad parent Koor have been even more closely aligned in the past. The two operated a joint venture called Nortel Networks Israel (Sales and Marketing) Ltd. until Nortel bought out Koor's 28 percent share in November 2003. (See Nortel Buys All of Israeli JV and Telrad, Optibase Team for IPTV.) The joint venture did sales, marketing, and support of Nortel products in the Israeli market. Nortel and Koor said at the time they would continue to work together "through research and development and commercial agreements in Israel, mainly with Telrad Networks."

Those facts point to the possibility that Nortel would be involved in the bidding for Telrad. Nortel might buy the company as a defensive move to keep it out of the hands of a competitor.

"We never comment on rumor or speculation," Nortel spokeswoman Ann Fuller says.

In the IPTV space, Telrad acts as a systems integrator. It has deployed at least one video network with Israeli middleware from Orca Interactive Ltd. and has announced a "global cooperation" agreement to use middleware, VOD software, and encoders from another Israeli company Optibase Ltd. (Nasdaq: OBAS). Similarly, Nortel announced that Orca middleware and Optibase encoders are part of its "IPTV Ecosystem."

Koor stopped reporting Telrad-specific financials in mid-2005. Then, Telrad had revenues of $41 million and operating expenses of $47 million.

Koor also has holdings in service providers ECI Telecom Ltd. and ECtel Ltd. (Nasdaq: ECTX), as well as in Telrad Connegy Inc. , a U.S.-based provider of IP voice applications for enterprises.

— Mark Sullivan, Reporter, Light Reading