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Nortel's Next Auction: The Packet Core

What's the next Nortel Networks Ltd. domino to drop? The Metro Ethernet Networks (MEN) business? (See Ciena: Ready to Pay for Nortel's MEN?)

Nope. If Nortel has it's way, the next piece auctioned off will be a group of packet core assets related to wireless networking.

What are those, exactly? Per Nortel's press release, the packet core assets include: "software to support the transfer of data over existing wireless networks and the next generation of wireless communications technology"; equipment and other "tangible assets"; and some "relevant non-patent intellectual property." (See Nortel Requests Packet Core Auction.)

Nortel says any purchaser will also get "a non-exclusive license of relevant patent intellectual property."

In other words, the potentially valuable patents are not part of the package. Nortel, then, appears to be selling technology that has been developed, but holding on to the patents -- that's what it did with the wireless assets sold to Ericsson AB (Nasdaq: ERIC). (See Nortel Could Sell LTE Patents Separately and Nortel's LTE Patent Goldmine.)

What's different in this case, though, is that Nortel has announced it has put particular assets up for sale without having an initial "stalking horse" bidder. Sales of Nortel's wireless and enterprise divisions each got started by one prospective buyer -- Nokia Networks and Avaya Inc. , respectively -- offering a price, which triggered the auction process. (See Avaya Offers $475M for Nortel's Enterprise, Nortel to Sell Enterprise Business , Nortel: It's All Up for Sale, and Nortel to Sell Wireless Assets to NSN.)

That's how Ericsson won Nortel's wireless assets for $1.13 billion, while Avaya landed its prey and walked away with the enterprise business for about $900 million. (See Nortel Wireless Winner: It's Ericsson! and Avaya's $900M Bid Wins Nortel Auction.)

In this case, it appears Nortel wants to start the countdown -- but it needs permission first. According to its news release, issued late Monday, the company has filed motions with U.S. and Canadian courts to get an auction started for the Packet Core Assets.

The question now, is, who might bid?

The wireless packet core sector, which is currently focused on developing Evolved Packet Core (EPC) capabilities for LTE networks, is currently populated by the major wireless infrastructure vendors -- Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , NEC Corp. (Tokyo: 6701), Nokia Networks , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) -- plus Cisco Systems Inc. (Nasdaq: CSCO) and a few specialists such as Starent Networks Corp. (Nasdaq: STAR) and WiChorus Inc. (See Core Network Challenges LTE Vendors, ZTE Pumps Its LTE Credentials, WiChorus Unveils LTE Packet Core, and WiChorus Packet Core Is in the Clear.)

But Nortel has been active in the mobile data infrastructure market for years with its Shasta platform, which the Canadian vendor used as the basis for its own EPC developments.

One potential bidder for Nortel's packet core technology is Hitachi Ltd. (NYSE: HIT; Paris: PHA), which has been working with Nortel on an LTE packet core development for Japanese operator KDDI Corp. (See Nortel Snares LTE Core Deal.)

Hitachi, in fact, has just opened an LTE core architecture R&D center in Richardson, Texas, right next to Nortel's wireless R&D facilities. (See Hitachi Does LTE R&D in Dallas.)

Coincidence? Maybe. Maybe not.

— Craig Matsumoto, West Coast Editor, Light Reading

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