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Nortel, Moto in JV Talks?

The answer to Nortel Networks Ltd. 's wireless growth could be "Hello, Moto."

The Wall Street Journal, citing unnamed sources, reported this morning that Motorola Inc. (NYSE: MOT) and Nortel are in talks to form a joint venture that would combine their wireless infrastructure units under one roof. If consummated, the WSJ estimates the new JV would have sales of about $10 billion annually.

Motorola has already said it was considering a "structural and strategic realignment" of its businesses. (See Moto: Spin or Sale?) The big unknown: How would a combination with Nortel businesses unlock shareholder value? Or might it have the opposite effect, possibly disguising the unit's performance against a backdrop of older technologies?

Analysts say the deal could give Motorola's unit a new focus, while giving the JV a more realistic shot at keeping up with competitors. "Growth would remain an issue; however, with more scale (16% of global share) it will have a better base to build on if it would go aggressively into LTE (4G) in the future against Ericsson AB (Nasdaq: ERIC), Nokia Networks , and Alcatel-Lucent (NYSE: ALU)," writes Oppenheimer & Co. Inc. analyst Ittai Kidron in a note to clients sent this morning.

The Oppenheimer team says that for Moto, the reported talks are a good sign that the company is trying to unlock the value of its businesses. For Nortel, the analyst team writes that a potential deal is positive, "but more complicated given its strong contribution to Nortel's EPS."

While not commenting specifically on the JV reports, a Motorola strategist told Reuters this morning that the handset business is undervalued and that a recovery would have to be "product led."

"We're going to be expeditious about our review," Motorola's senior vice president for corporate development and strategy, Don McLellan, told Reuters at the Mobile World Congress show in Barcelona. "The market had dramatically undervalued mobile devices. That was a concern to us," he said, adding, "We know it can regain market leadership."

For Nortel, a catalyst is definitely needed in the mobility space. Roughly 40 percent of the company's revenues came from its carrier networks group last year -- and that unit mostly provides solutions for CDMA and GSM standards, which aren't dead center of the wireless future the company espouses frequently in blogs and interviews. Also, Nortel's enterprise group looked to be the only division with consistent growth, a sign that the company could stand to add to or change its product mix in most other areas.

— Phil Harvey, Editor, Light Reading
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dapcan 12/5/2012 | 3:48:00 PM
re: Nortel, Moto in JV Talks? I am sure we can find a good name for the JV.

Perhaps NoMoto
or Ola-Tel
Mark Sebastyn 12/5/2012 | 3:47:59 PM
re: Nortel, Moto in JV Talks? Lot of fun to be had with this one:

Mor-Tel - Because Nortel wasn't enough.

Motel - Your high end wireless infrastructure provider

Nortola

meyerjr 12/5/2012 | 3:47:58 PM
re: Nortel, Moto in JV Talks? I realize this possible JV is focused on GSM/CDMA wireless services but given that enterprise/Wi-FI-based wireless is a shared product interest for both companies (given Moto assimilated Symbol)might we see integration there too?
If so, it appears to be another nail in Trapeze's OEM relationship coffin...
DCITDave 12/5/2012 | 3:47:58 PM
re: Nortel, Moto in JV Talks? Nortola -- sounds like a kind of cheap canadian olive oil.

in other news, do they have olives in canada?

ph
paolo.franzoi 12/5/2012 | 3:47:58 PM
re: Nortel, Moto in JV Talks?
I thought Olive Oil was Canadian. I mean going out with a sailor like Popeye?!?

I was thinking more like Motel VI (cuz its funnier than Motel JV) for a name.

seven
joe_average 12/5/2012 | 3:47:56 PM
re: Nortel, Moto in JV Talks? The Wi-Fi business for Nortel is tiny compared to GSM/CDMA (millions versus billions). Also the business units are completely different.

I really doubt that the term "Wi-Fi" was even mentioned in this negotiation.
FbytF 12/5/2012 | 3:47:54 PM
re: Nortel, Moto in JV Talks? No-Mo
Pete Baldwin 12/5/2012 | 3:47:53 PM
re: Nortel, Moto in JV Talks? I think we have a winner.
donniall 12/5/2012 | 3:47:50 PM
re: Nortel, Moto in JV Talks? I thought it sounded more like a herbal remedy for Irritable Bowell Syndrome - which, in the circumstances may have a certain resonance ;)


================================================
Nortola -- sounds like a kind of cheap canadian olive oil.

in other news, do they have olives in canada?

ph
NoCopper 12/5/2012 | 3:47:49 PM
re: Nortel, Moto in JV Talks? Not true, Nortel has only sold its 3G UMTS business because 3G will never fly. Actually from what I hear, mobile service providers are already stopping or at least slowing down 3G investment.
Nortel is active in 4G (LTE+WIMAX) as well as in 2G (GSM+CDMA). This might be the right move to join forces in 4G with Moto, but only time will tell.

BTW: What about Nortorola ?
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