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VoIP Systems

Avaya Offers $475M for Nortel's Enterprise

The next Nortel Networks Ltd. domino appears ready to fall, as Avaya Inc. has put in a $475 million bid for the assets of the company's enterprise business.

The announcement, made this morning, comes just before the July 21 deadline for bids on Nortel's wireless business. Nokia Networks has already made a $650 million offer for that piece of Nortel. (See NSN Picks at Nortel's Mobile Bones , How NSN Is Funding Its Nortel Bid, and Nortel's LTE Patent Goldmine.)

The Enterprise Solutions Business includes Nortel's enterprise telephony, unified communications, and data networking products, as well as the Nortel Government Solutions unit.

Like the Nokia Siemens bid, Avaya's offer must be pitted against competing bids in a stalking-horse auction, a requirement of U.S. bankruptcy law. The stalking-horse sale won't apply to the Europe, Middle East, and Africa portion of the enterprise business; Avaya and Nortel have simply signed an asset sale agreement there.

Today's announcement makes no mention of any Nortel jobs potentially transferring to Avaya. Nokia Siemens had pledged to take on at least 2,500 employees.

Avaya has long been a favorite candidate to buy this part of Nortel, with the other leading candidate being Siemens Enterprise Communications GmbH & Co. KG , a joint venture of Siemens AG (NYSE: SI; Frankfurt: SIE) and private equity firm Gores Group LLC . The supposed purchase price had been around $500 million.

Nortel is in the process of trying to sell all its assets. The biggest chunk left, assuming the enterprise and wireless sales go smoothly, would be the Metro Ethernet Network business, which could go for $750 million, and had nine interested suitors, according to reports last month. NSN hasn't fully ruled itself out as one of them. (See Who's Waving Their Wad at Nortel’s MEN? and NSN May Buy Other Nortel Assets.)

But here's a potential spanner in the works. MatlinPatterson Global Advisors, one of Nortel's largest bondholders, wants to strike a deal that keeps Nortel intact. The deadline for bids in the NSN stalking-horse auction is tomorrow, and the court has ruled that it's OK for someone to bid for all of Nortel's assets, instead of just the wireless piece. (See Nortel: Think Big.)

— Craig Matsumoto, West Coast Editor, Light Reading

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