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Analyst: Nortel VoIP Biz Bids Imminent

Ray Le Maistre
12/21/2009

The Carrier VoIP and Application Solutions (CVAS) unit is set to be the next part of Nortel Networks Ltd. to go to the auctioneers, according to an analyst report.

Catharine Trebnick at Avian Securities LLC is expecting a "stalking horse" bid for the unit to be announced this week and believes there could be interest from a number of parties, because AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) are both significant customers.

Any bid is long overdue: The market was prepared for some CVAS auction action in August, when an opening gambit of around $800 million had been expected. (See Report: Stalking Horse Stampedes Toward Nortel's VoIP Biz .)

Trebnick identifies Genband Inc. , NEC Corp. (Tokyo: 6701), Nokia Networks , and Sonus Networks Inc. (Nasdaq: SONS) as potential bidders. (Those names were in the frame earlier in the year, too -- see Who's Dialing In for Nortel's VoIP Assets? )

She believes NSN could achieve more significant revenue and cost synergies than either Genband or Sonus and cites sources who suggest AT&T is keen for NSN to buy the CVAS business.

Whether NSN has the stomach for another Nortel auction is another matter, having already lost out on two previous occasions. (See Ciena Beats NSN to Buy Nortel's MEN and Ericsson Delivers Knockout Blow to NSN.)

The analyst regards NEC as the "dark horse" that could surprise the market with a bid. So the dark horse could become the stalking horse…

Trebnick doesn't believe investors would favor a bid from Sonus, and she thinks the VoIP systems vendor, which has suffered during the recent downturn, would likely see its share price "come under significant pressure" if it made a successful bid for Nortel's unit.

Trebnick doesn't expect to see Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), or Huawei Technologies Co. Ltd. get involved.

The CVAS business, one of the few remaining Nortel businesses still to find a buyer, should attract some competing bids. (See Nortel: What's Left on the Shelf?)

The unit, which is regarded as the global carrier VoIP equipment leader by a number of industry research houses, reported increasing year-on-year revenues in the third quarter, while the rest of Nortel's business units saw their sales dip. (See Nortel Touts VoIP Market Share and Nortel Shrinks Again.)

In addition, there's plenty of market growth left for CVAS's new owner to pick up: According to Heavy Reading, only about 22 percent of Class 5 voice lines in North America have been converted to VoIP. (See Handicapping the Nortel VoIP Triple Crown.)

— Ray Le Maistre, International News Editor, Light Reading

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Skinner
Skinner
12/5/2012 | 3:50:42 PM
re: Analyst: Nortel VoIP Biz Bids Imminent
Nortel is just like Jason's mom... everyone's getting a piece.
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