NSN Linked to Nortel Asset Bid
Speculation has been mounting for the past few months that Nortel could sell off a number of business units, some of them piece by piece: Avaya Inc. and Siemens Enterprise Communications GmbH & Co. KG , a joint venture of Siemens AG (NYSE: SI; Frankfurt: SIE) and private equity firm Gores Group LLC , have been identified as potential bidders for Nortel's Enterprise business for some time. (See Is Nortel Prepping a Major Sale? and Should Nortel Be Sold for Parts?)
NSN declined to comment on the "speculation," while Nortel, which is in the midst of a restructuring process under bankruptcy protection rules, provided its stock response that it is "pursuing opportunities that we believe will provide maximum benefit to our key stakeholders, including our creditors, customers, and employees." (See Nortel Loses Billions & Plans Bonuses, Nortel Cuts 3,200 Jobs, Nortel Files for Bankruptcy Protection, and Nortel Appoints EMEA Administrator.)
The WSJ report also suggested that Genband Inc. is lining up a bid for Nortel's media gateway and MSS multiservice switch product lines. Genband isn't shy about opening its purse strings to further its ambitions: Last year it acquired session border controller and security gateway vendor NextPoint Networks and a media gateway product line from Nokia Siemens. (See Genband Scores NextPoint and Genband Gets a Gateway to NSN.)
Nortel has already shown it's prepared to sell off chunks of its empire, having just completed the divestiture of its application switching and WAN optimization products to Radware Ltd. (Nasdaq: RDWR) for just $18 million. (See Nortel to Offload Data Gear to Radware and Radware Completes Nortel Buy.)
The motivation behind any NSN bid for Nortel's CDMA and LTE assets would appear to be the opportunity to strengthen its presence in North America and China, and boost its chances of picking up some early next-generation wireless relationships. NSN is strong in Europe and Asia/Pacific but generates only about 5 percent of its revenues from North America, by far its weakest region. (See Nokia Siemens Dips in Q4.)
Among Nortel's CDMA customers are Bell Mobility Inc. , China Telecom Corp. Ltd. (NYSE: CHA), Sprint Corp. (NYSE: S), and Verizon Wireless , while Nortel's LTE equipment has gained traction at T-Mobile International AG and Japan's KDDI Corp. (See Nortel Keeps LTE Dream Alive, KDDI Picks Nortel LTE Core, Nortel Wins CDMA Deal, Nortel's $2B CDMA Bump, and Sprint Invests in EV-DO.)
The world's CDMA operators, as well as mobile carriers with GSM-based networks, are expected to migrate eventually to LTE, with Verizon Wireless leading the way. (See CTIA 2009: Verizon LTE Goin' Steady.)
Neither Nortel nor NSN, which has developed its own LTE platform, is currently involved in Verizon Wireless's LTE plans, though it's possible that the combination of Nortel's CDMA and LTE assets with NSN's financial stability might open the door for future involvement.
Buying Nortel's CDMA business, which is the biggest part of the vendor's Carrier division, would also add to NSN's top and bottom lines. In 2008, Nortel's CDMA business generated revenues of nearly $2.2 billion and was profitable at an operating level. The TDM switches and VOIP products -- the Carrier division's "circuit and packet voice" business -- generated revenues of $544 million in 2008.
The only part of Nortel's Carrier division not mentioned as being of interest to NSN is the GSM and UMTS core business, which generated nearly $1.6 billion in sales in 2008.
If Nortel were to offload the majority of its Carrier division and sell its Enterprise business, it would be left with its Global Services division, its GSM business, and the Metro Ethernet Networks (MEN) division, which, ironically, is the only division that Nortel has ever explicitly announced is for sale. (See Nortel to Sell Carrier Ethernet, Optical Biz.)
That sale process, announced in September 2008, didn't go as planned, though, and Nortel announced in February this year that the "previously announced potential MEN divestiture has been put on hold." (See Nortel to Hold MEN.)
That hasn't stopped industry speculation about potential interest in some of the MEN division's assets, particularly the well regarded optical business. (See Is Ciena Ogling MEN? )
— Ray Le Maistre, International News Editor, Light Reading