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Motorola, Nortel in Wireless Merger Talks

Looking to close the gap on wireless network rivals Nokia and Ericsson, Schaumburg, Ill.-based Motorola Inc. is exploring plans to merge its wireless network equipment with Canada's Nortel Networks , according to published reports.

The negotiations, which was first reported by BusinessWeek, center on Nortel acquiring Motorola's wireless division and spinning out an independent company.

A potential deal to merge the two wireless divisions would put Nortel and Motorola right back in the race for contracts to develop high-speed wireless networks.

Officials on both sides could not be reached early Friday to discuss the report.

Nortel Networks, the second-largest telecom equipment maker in North America (behind Lucent), provides networking solutions and services that support voice, data, and video transmission over wireless and wireline technologies.

With the depressed state of the telecommunications sector and a declining stock price, it is not clear how Nortel would finance such a transaction. In Friday's early going, Nortel's stock was trading at $4.80, a shade above the 52-week low and well off the year-high of $18.75.

Financially, the company has seen better days. For fiscal year ended Dec. 31, 2001, Nortel's revenues dipped 37 percent to $17.5 billion, with net losses before items reaching $24 billion. The loss includes $15.8 billion in restructuring and other non-recurring charges.

Motorola has not been without troubles of its own. Last March, the company cut 7,000 jobs to deal with the slow growth in its wireless division. Since December 2000, Motorola laid off about 12,000 employees and announced plans to reduce overhead expenses.

Motorola sells services that include software-enhanced wireless telephone, two-way radio and messaging products and systems, as well as networking and Internet-access products. It also provides systems for the delivery of interactive digital video, voice and high-speed data solutions for broadband operators and embedded semiconductor services for customers in the networking and computing and wireless communications business.