Avaya Grabs Nortel’s Enterprise Biz for $475M

The sell-off of networking vendor Nortel continues with the announcement that its enterprise division is being sold to Avaya for $475 million.

The once high-flying Nortel entered into bankruptcy protection at the beginning of 2009. The company has been selling off its assets ever since.

As Nortel is currently in bankruptcy, the deal with Avaya is what is known as a “stalking horse” asset sale, which means that other bidders could potentially outbid Avaya for the enterprise assets. Avaya itself is currently privately owned as the result of an $8.2 billion buyout in 2007 led by private equity firm Silver Lake.

At a price tag of $475 million, Avaya will be paying far less for Nortel’s enterprise assets than what they were worth a decade ago.

Nortel’s enterprise business was the result of Nortel’s acquisition of Bay Networks in 1998 for over $9 billion.

Though Nortel has been in bankruptcy protection for most of 2009, the enterprise unit hasn’t been silent about putting out new releases. In May, the division rolled out a new core networking virtual services platform, a new secure router platform and a new Unified Communications management solution.

The sale of Nortel’s Enterprise business is the third such business unit divestiture by Nortel this year. In April, Nortel sold off its Alteon application networking gear to Radware for $18 million.
In June, Nortel entered into a stalking horse agreement with Nokia-Siemens Networks, giving it Nortel’s wireless CDMA and LTE assets. That deal is currently pegged as being worth $650 million.

“We continue to be fully focused on running our operations and continuing to serve our customers while actively engaged in the sale of our businesses,” Nortel President and CEO Mike Zafirovski said in a statement. “We have determined that the sale of our businesses maximizes value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible. This represents the best path forward, and we are advancing in our discussions with interested parties for our other businesses.”

For Avaya, the pending acquisition of Nortel’s enterprise business unit will expand its scale and size. Avaya is best known as a vendor of enterprise VoIP and telephony solutions. With the Nortel assets, Avaya will gain enterprise routing and switching gear to complement its existing portfolio.

“The addition of Nortel Enterprise Solutions will increase Avaya’s global scale, expand our channel partner network, and strengthen our world-class portfolio of products and services,” Avaya President and CEO Kevin Kennedy said in a statement. “This is a strategic opportunity to acquire talent and complementary assets that position the combined company for growth and success.”

Nortel was founded in 1895 in Canada as the Northern Electric and Manufacturing company, barely 20 years after the telephone itself was first invented in 1874.

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