Nortel Enterprise Torn Between Two Suitors

Breaking apart a company isn’t easy to do. Just ask Nortel.

Networking vendor Nortel is in the process of selling itself off in pieces and is doing a rather good job at it. Last month, Nortel announced a bid from Nokia Siemens for Nortel’s wireless unit worth $675 million. On Monday it announced a stalking horse deal with Avaya for its enterprise business worth $475 million.

Neither bid necessarily reflects what might end up as the final price for either of those units and there is still a lot of uncertainty around the future of Nortel.

On the wireless side, Blackberry vendor Research in Motion (RIM) is now challenging Nortel to allow it to participate in the process, while on the enterprise side, the details on the deal are still sparse.

For one, there is no indication at this point with the Avaya bid as to how Nortel staff might be affected.

“We don’t know,” a Nortel spokesperson told InternetNews.com. “We have entered into a stalking horse agreement with Avaya which means we’re not done with the sale and we will continue to operate as Nortel until the sale is completed. That will go until the end of the auction phase which we anticipate will go on in about a month.”

Nortel has been in bankruptcy protection since January of this year. A stalking horse asset sale means that other bidders could potentially out bid Avaya for the enterprise assets and it allows Avaya to increase its bid price as well.

As far as how existing Nortel customers and products might be affected there are also are few answers. Nortel’s spokesperson noted that the bid won’t affect customers during the transition phase. That said at this point there are no formal guarantees about Nortel’s product lines and how they might exist under Avaya ownership.

One of Nortel’s key relationships is with Microsoft on the Unified Communications project that dates back to 2006.

Like Nortel, Avaya doesn’t yet know how the relationship might look under Avaya ownership.

“I can’t provide information about what a combined product and services portfolio will look like. Avaya spokesperson Lynn Newman told InternetNews.com. “Neither can I answer questions about staff and locations. I also can’t comment on the Microsoft agreement.”

Though Avaya isn’t sure about some of the tactical specifics, they do see some key strategic opportunities in acquiring Nortel’s enterprise assets.

“It will increase our global reach and scale and the combined business will have a greater revenue base from which to fund R&D,” Newman said. “We’ll also be able to expand our partner and channel network. Nortel has strong relationships with SIs (system integrators) and SPs (service providers) selling to large customers as well as an extensive network selling to smaller enterprises. These would complement our channel network.”

As far as the possible impact on Nortel customers, Newman noted that both companies share a commitment to open standards rather than proprietary architectures. She explained that customers of both companies will be able to protect their business communication investments through Avaya Aura, which is Avaya’s open standards-based technology.

“Aura is compatible with Nortel’s open architecture,” Newman said. “This allows customers who want to migrate to Avaya to have a smooth migration within a multi-vendor environment. In particular, traditional Nortel customers should consider Avaya Aura as a means to migrate to SIP while integrating with their existing investments, allowing them to migrate and integrate as needed.”

Next page: RIM wants in

Page 2 of 2

Blackberry Vendor Wants In

While the Nortel Enterprise bid goes on with Avaya, Nortel’s efforts to sell off its wireless division to Nokia Siemens now has a new snag. RIM is now saying it has been blocked by Nortel from participating in the bidding process. In a statement, RIM said that it would be prepared to pay up to $1.1 billion for the wireless assets, which would be a significant premium over the $675 million offered by Nokia Siemens.

“RIM is extremely disappointed that Nortel’s world leading technology, the development of which has been funded in part by Canadian taxpayers, seems destined to leave Canada,” Jim Balsillie, RIM’s co-chief executive officer said in a statement.

“RIM remains extremely interested in acquiring Nortel assets through a Canadian ownership solution that would serve the dual purpose of keeping key wireless technologies in Canada and extending RIM’s leadership in the research, development and distribution of leading edge wireless solutions, but RIM has found itself blocked at every turn.”

Nortel disputes RIM’s accusation that it blocked a RIM bid.

In a statement e-mailed to InternetNews.com, Nortel noted that it was disappointed with RIM’s comments.

“As previously announced, Nortel entered into a stalking horse sale agreement with Nokia Siemens to sell these assets, which agreement is subject to higher or better offers,” Nortel said. “On June 30, 2009, the courts established bidding procedures for auction of these assets. RIM did not object to the approval of these procedures. Since the approval of the procedures, Nortel has engaged with a number of potential bidders, including RIM.”

According to Nortel, it was not until July 15, 2009 that RIM submitted a letter to Nortel asking to be a qualified bidder. RIM did not immediately respond to InternetNews.com request for comment.

Nortel goes on to note that RIM has refused to comply with the court approved procedures. That issue aside, Nortel isn’t averse to including RIM at this stage.

“Nortel continues to be willing to provide RIM with the opportunity to participate in the auction and even without RIM’s participation believes that an active auction will result in maximizing the value of Nortel’s assets,” Nortel stated.

News Around the Web