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VoIP Systems

Who's Dialing In for Nortel's VoIP Assets?

Although all Nortel Networks Ltd. 's assets are now clearly up for sale to the highest bidder, a handful of suppliers have already been flirting with the idea of plunking down cash for the vendor's VoIP and switching assets.

According to analysts who are tracking these developments, the list of possible candidates includes Sonus Networks Inc. (Nasdaq: SONS), Genband Inc. , Nokia Networks , and Avaya Inc. , with Alcatel-Lucent (NYSE: ALU) and Metaswitch Networks among the darkest of the dark horses.

Among that group, it's believed that NSN, Genband, and Sonus have requested the books for Nortel's VoIP and switching division.

But in comments to Light Reading following its $650 million "stalking horse" deal for Nortel's CDMA and Long-Term Evolution (LTE) access technology, NSN said it does not have any plans to acquire other Nortel assets. But it didn't rule out further negotiations, so NSN has at least left itself some wiggle room. (See NSN Picks at Nortel's Mobile Bones , Nortel: It's All Up for Sale, NSN: Is Verizon on the Horizon?, NSN Misses Nortel's Key APAC Assets, Nortel's LTE Brain Drain, and Richard Lowe, President of Carrier Networks, Nortel.)

NSN already has a decent softswitch anyway, so any play for Nortel's VoIP assets would be to buy market share, notes Avian Securities LLC senior research analyst Catharine Trebnick. Although a Nortel deal would bring Cox Communications Inc. and Charter Communications Inc. into the NSN VoIP fold, NSN is already solid with Time Warner Cable Inc. (NYSE: TWC) and Cablevision Systems Corp. (NYSE: CVC), and will likely use its own gear to pursue next-gen cable wins centering on PacketCable 2.0 and the IP Multimedia Subsystem (IMS), she says. (See PacketCable 2.0: Back on the Front Burner and The Slow Road to PacketCable 2.0.)

Trebnick still views Sonus as the lead candidate. She's previously said Sonus is in the running to buy Cedar Point Communications Inc. , a VoIP gear company that has historically emphasized cable. (See Sonus Looking at Nortel Assets, Cedar Point.)

But how much would Nortel's VoIP and switching assets fetch? Trebnick estimates that the VoIP assets could be worth $800 million, with the legacy stuff worth about $250 million. In all, Nortel has about 320 different carriers using equipment from that unit. "It's a billion-dollar business," she says.

But getting $1 billion for it is another matter. Based on the $650 million price of the NSN deal, Nortel could realistically get about $350 million for the VoIP and switching assets, she says.

That price could bode well for Sonus, which had $386.1 million in cash and investments at the end of the first quarter. "It would hit their balance sheet, but it would be their last hurrah," Trebnick says.

Although Genband could be in the running, "it's too big of a chunk for them to boil down," Trebnick says, noting that the vendor could factor in whether Nortel was willing to break out its media gateway assets. "I don't think [Nortel's VoIP and switching assets] are fire sale material quite yet." And even if NSN had a change of heart, it would probably have to raise more funds, she adds.

Although Huawei Technologies Co. Ltd. is looking to beef up its presence in North America, Trebnick thinks it's not in the running for Nortel's VoIP/switching assets because of conflicts with the Chinese giant's own gear. (See Huawei Steps Up in North America and Huawei Has New Softswitch.)

As for Nortel, it's still not saying much about the bidding activity involving its VoIP and Metro Ethernet Networks (MEN) divisions. "The Company is advancing in its discussions with external parties to sell its other businesses -- this will provide an opportunity to maximize value while preserving innovation and jobs to the greatest extent possible," the company reiterated, in a prepared statement.

A Metaswitch official declined to comment. The other potential suitors could not be reached for comment.

— Jeff Baumgartner, Site Editor, Cable Digital News

TheGordonGekko 12/5/2012 | 4:02:15 PM
re: Who's Dialing In for Nortel's VoIP Assets?

This is just another prime example of the tectonic shift underway in the global telecom landscape......

light899 12/5/2012 | 4:02:14 PM
re: Who's Dialing In for Nortel's VoIP Assets?

Besides having the highest rated IP based switching, Sonus has the most experience in transitioning Nortel DMS networks to second gen softswitching, so for Nortel's customers, Sonus is by far the best choice.


As far as some of the other names, in addition to having some of their own early IMS gear, NSN and ALU are and will continually be more focused on wireless radio and managed services, they also have Genband for the related equipment when they need them.


This deal is way to security sensitive for Huawei to be considered and Genband simply does not have near the experience Sonus has for DMS replacement, so even if they wanted to it wouldn't be good for Nortel customers.


Regarding Genband, I think they have created a good niche in supplying legacy vendors existing customers with media gateway related gear (which is often gear originally created by that vendor), but in winning and implementing major new customer builds (level 3, global crossing, xo, at&t, qwest, belgacom etc) they aren't in the same league as Sonus. Therefore, any kind of attempt like this for them would be terrible for them and Nortel customers.


Perhaps Sonus will also get some loan guarantee for keeping some local jobs in Canada.


 

ed_63 12/5/2012 | 4:02:11 PM
re: Who's Dialing In for Nortel's VoIP Assets?

OK - I admit I am a Genband customer.   But they completely blow away sonus on scale, price and functionality.   I was thumbing through the industry reports we used prior to our selection and Genband was by far the market leader.  Nortel and Genband are the #1 and #2 in the market.  Sonus is down in the bottom half of the report.   Sonus only did 19M in product revenue for the last quarter.  Genband is private but our DB reports had them north of 150M


The sonus platform is long in the tooth and we decided against it.   The Genband platform was the product that ALU, NSN and others use in their networks.  plus they told us about all their new wins in China and India. 


If the North American operators are going to migrate - my bet is that they are going to go with the latest and greatest technology development that is the lowest cost versus a platform is old and not as scalable.  Plus Genband can work with their big channel partners (ALU and NSN) to deploy to big operators.  if I was a Nortel customer I would migrate my network to something that can work for me for a long enough time to work thru my network evolution strategy. 

light899 12/5/2012 | 4:02:08 PM
re: Who's Dialing In for Nortel's VoIP Assets?

Sorry, but your information couldn't be more inaccurate. Sonus is ranked #1 in the coveted Gartner leaders quadrant and has been for multiple years, ahead of all others for softswitching. Genband is not even in, or even next to the leaders quadrant.


Genband was also not even mentioned in the Infonetics worldwide service provider survey of IP-voice communications vendors.


"When asked specifically about their vendor preferences, Sonus was rated highest in 5 of the 8 categories surveyed. The study compared every major IP-voice solution provider including Alcatel-Lucent, Cisco, Ericsson, Huawei, Nokia Siemens and Nortel. Sonus ranked highest among all the vendors for technology, product roadmap, price-to-performance, security and management."


No one scales and performs like Sonus. I think real customers know this, that's why Genband gets mainly all its revenue from accounts that its legacy partners already have, while Sonus had to go out and win all its business and now handles 30% of all IP voice traffic. Genband not even close.


 


 

mu-law 12/5/2012 | 4:02:07 PM
re: Who's Dialing In for Nortel's VoIP Assets?




More inaccurate? I question how coveted a report with no facts, dollar amounts, or port counts can be... and FWIW the Infonetics report I read corroborates the claims ed_63 made, so I don't really know what you are talking about here.


I think that real customers will have some pessimism about the prospects of SONS swallowing an NT. They don't exactly have a stellar track record with M&A, and they are nowhere when it comes to Class 5 / softswitch, etc. By contrast, General Bandwidth has already done Tekelec, part of Siemens, Nextone, Reefpoint, etc.


I guess this might still be a good fit though as both SONS and NT seem to be on the outside looking in when it comes to IMS.




light899 12/5/2012 | 4:02:06 PM
re: Who's Dialing In for Nortel's VoIP Assets?

Other highlights from the study, third bullet point.


First, regarding IMS, Sonus invented the architectural framework which IMS standards bodies have adopted. (SIP, diamater, distrubuted arch.)


Second, General Bandwidth bought the thrid place softswitching assets from tklc, and then also agreed to buy and resell NSN and ALU's since they were all getting their butt handed to them by Sonus and didn't want to keep supporting them!


Genband's sales numbers, as you know, are a bit misleading since they are almost all existing customer additions from -- alu and NSN.


Oh and here's the real infonetics report.


*Other highlights from the study, third bullet point.*


http://www.reuters.com/article/pressRelease/idUS198795+23-Jul-2008+MW20080723

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