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Huawei Seen as Likely Nortel Suitor

Ray Le Maistre
9/25/2008

BERLIN -- Carrier Ethernet World Congress -- Here's the question that's on everyone's lips here in Berlin: Who might try to buy Nortel Networks Ltd. 's carrier Ethernet and optical business? (See Nortel to Sell Carrier Ethernet, Optical Biz.)

To recap quickly, Nortel announced last week that it's looking to offload its Metro Ethernet Networks (MEN) business, which houses its optical and carrier Ethernet products. At the same time it reviewed its 4G wireless strategy and announced a profits warning. (See Nortel 4G Plans Up in the Air.)

Nortel wants a cash deal for MEN, but won't say if it is already engaged with any potential buyers.

It's also unclear what sort of price the business unit, which is on course to generate between $1.5 billion and $2 billion in revenues this year, might carry. Here in Berlin, the range of estimates (from those brave enough to guess) is anything from $250 million to $2 billion.

There's also talk here in Berlin that two companies -- Ericsson AB (Nasdaq: ERIC) and Huawei Technologies Co. Ltd. -- have instructed their bankers to check out the details of the proposed sale, though neither company is prepared to comment on any speculation regarding any potential move for the Nortel division.

With the topic attracting much gossip and speculation, Light Reading conducted a basic face-to-face verbal survey of carrier Ethernet industry executives to find out who they think might be interested in Nortel's optical and carrier Ethernet business.

We approached more than 50 individuals, of whom 44 provided an answer, with some providing more than one suggestion. No options were offered to respondents –- they had to come up with their suggestions themselves.

Most of our respondents took the question seriously, some less so -- hence the inclusion of Wal-Mart among the responses.

The results of this somewhat unscientific survey? Well, Huawei was, by a clear margin, the company suggested the most, a choice that, in Light Reading's view, makes sense. (See Why Huawei Should Buy Nortel's MEN .)

But other big names also received multiple votes, particularly Cisco Systems Inc. (Nasdaq: CSCO), with a number of survey respondents (all of whom were guaranteed anonymity) suggesting that the IP giant might be interested in Nortel's well regarded optical assets. (See Nortel Rolls On With 40-Gig and Nortel Intros 40 Gig, 100 Gig.)

Other suggestions made by multiple respondents include Ericsson, private equity (specifically from the Middle East), and, second only to Huawei, "no one."

Interesting suggestions that received only one or two mentions from respondents include Google (Nasdaq: GOOG), the Canadian government (a somewhat topical response!), and Infinera Corp. (Nasdaq: INFN).

Check out the full results in the table below, and, of course, we encourage any further suggestions or comments on the message board at the foot of this page.

Table 1: Who Might Buy Nortel's Metro Ethernet Networks Division?

Respondent suggestion* Number of survey respondents making this suggestion
Huawei 18
No one 9
Cisco 5
Ericsson 3
Private equity 3
Alcatel-Lucent 2
Extreme Networks 2
Fujitsu 2
Google 2
Juniper 2
ADVA (as a merger) 1
Canadian government 1
Ciena 1
Force10 1
Infinera 1
NEC 1
Nokia Siemens Networks 1
Sycamore Networks 1
Spinoff 1
Tellabs 1
Wal-Mart 1
Xtera 1
ZTE 1
* 44 respondents were asked their opinions on who might acquire Nortel's MEN division; no options were provided, all suggestions initiated by respondents.




— Ray Le Maistre, International News Editor, Light Reading

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DCITDave
DCITDave
12/5/2012 | 4:14:22 PM
re: Huawei Seen as Likely Nortel Suitor
For the link:
http://www.forbes.com/2009/01/...
macster
macster
12/5/2012 | 3:31:13 PM
re: Huawei Seen as Likely Nortel Suitor
Why would one buy a company?
1). Market share
2). Technology
(any other 'real' reasons?)

With this in mind, we have a clearer picture of whom the buyers might be.
HomerJ
HomerJ
12/5/2012 | 3:31:13 PM
re: Huawei Seen as Likely Nortel Suitor
Please, I don't want tainted yogurt and lead in my interwebs. My series of tubes is already clogged with Russian spam as it is.
t.bogataj
t.bogataj
12/5/2012 | 3:31:10 PM
re: Huawei Seen as Likely Nortel Suitor
It is so clear, yet nobody sees it!

** Was it not Ray Le Maistre that speculated on LR why Huawei should buy MEN?
** Is it not the LR that has the biggest impact?
** Did not, then, all respondents read Ray's blog?

No wonder most of respondents choose Huawei. (All other answers being wishful thinking...)

Tata,
T.
t.bogataj
t.bogataj
12/5/2012 | 3:31:10 PM
re: Huawei Seen as Likely Nortel Suitor
macster,

you forgot option 3: To eliminate the competitor.
macster
macster
12/5/2012 | 3:31:09 PM
re: Huawei Seen as Likely Nortel Suitor
macster,

you forgot option 3: To eliminate the competitor.

Option 4: To kill a technology!

-------------------------------------------------


Thanks guys! The above and say, political aspects, e.g. having to buy a company to win business (WWP comes to mind) falls under "market share".

Filling a portfolio gap or simply buying into a technology space comes under "technology". The one bit that does not fit is private equity - think ECI, GEO, Aeroflex, etc.

Oddly enough, I actually think ALU is a good fit as the MEN division (Layer 2) complements well their IP business (Timetra). Not sure what happened to Riverstone. Though the optical part of MEN could be seen to be additional overlap to that of Lucent's and Alcatel's, I'm sure it can be integrated with the good points put to use.

Let's see. ALU get market share. They get Nortel's 40G/100G technology (the QPSK improvement to On-Off Keying), they eliminate a competitor, and can kill the technology if they want to! LOL
basselk
basselk
12/5/2012 | 3:31:09 PM
re: Huawei Seen as Likely Nortel Suitor
Option 4: To kill a technology!
DCITDave
DCITDave
12/5/2012 | 3:31:09 PM
re: Huawei Seen as Likely Nortel Suitor
Tomorrow I shall write a column that makes the same argument for Wal-Mart. We'll see what happens.
sgamble
sgamble
12/5/2012 | 3:31:07 PM
re: Huawei Seen as Likely Nortel Suitor
Nobody mentioned Canadian Tire or Tim Horton's?
K28.5
K28.5
12/5/2012 | 3:31:06 PM
re: Huawei Seen as Likely Nortel Suitor
ALU is in too deep trouble to swallow a fish this size. Moreover, they have the 7450 that gives them L2 aggregation. Buying the lot only for the optical technology? I doubt it.

NSN, following their Atrica acquisition, seems headed in another direction than Nortel's PBB/PBB-TE path.

Huawei, in my opinion, won't gain a significant market share as a result of taking the MEN, nor do they need most of the technology.

I would have been in favor of private equity, but given the financial sector state, I doubt that NT will sell at a price one of these will be willing to pay.

So, IGÇÖm left with no-one, although I canGÇÖt imagine NT management making this announcement without closing a deal in advance.
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