RealTime IT News

Nortel Wireless Assets Go to Ericsson for $1.13B

And the winner is...

After a month of bidding, Nortel has announced the results of the so-called "stalking horse" auction for its wireless assets, with Telefonaktiebolaget LM Ericsson -- better known as Ericsson -- emerging as the winner with a bid of $1.13 billion.

Ericsson's winning bid topped the initial June bid from Nokia-Siemens for $650 million. The deal is subject to Canadian and U.S. court approvals of the proposed sale agreement, which Nortel and Ericsson will seek at a joint hearing on July 28.

Nortel has been under bankruptcy protection since the beginning of 2009. The embattled networking giant entered into a stalking horse agreement with Nokia-Siemens in June, which meant that other bidders could emerge to outbid and win the Nortel wireless assets.

Among those assets are Nortel's CDMA and LTE Access technologies.

The deal will give Ericsson a technology infusion and could serve to keep Nortel's LTE technology out of the hands of Ericsson's rivals in the competitive next-generation wireless technology race.

"Of course, any deal that anyone makes has an impact on the rest of the competitive landscape," Ericsson President and CEO Carl-Henric Svanberg said during a conference call with press and analysts. "We do not believe in making deals on a negative or defensive rationale -- we do it for the offensive rationale for what we can do with the business, and that's where we're coming from."

Svanberg also noted during the call that while Nortel may be in bankruptcy, the company's technology and assets are still valuable for a number of reasons.

"CDMA is a technology that will go on for many more years and will be a stream of business for us," Svanberg said. "But CDMA will be the first networks to migrate to LTE, and that is of strategic important to us."

LTE represents the evolution for CDMA wireless technology to faster speeds with increased data capabilities. Ericsson has already been involved in developing its own LTE technologies, efforts that will now get a boost, it said.

"With LTE, we see primarily that we'll continue with our standard development and the assets now coming from Nortel will work with the migration from CDMA to LTE," Ericsson CFO Hans Vestberg said during the call. "That is a great asset that we needed to build up anyhow, and now we get a step-up investment."

The wireless asset sale will be Nortel's second stalking horse transaction while it's been under bankruptcy protection. In April, Nortel sold off its Alteon application networking gear to Radware for $18 million.

Nortel currently has a third stalking horse auction underway for its enterprise networking gear division. Avaya has started the bidding at $475 million in an effort to expand its own networking and VoIP technology portfolio.