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Nortel Dismemberment Begins
Nortel has stated publicly, for the first time, that the company's divisions will be sold off, and has begun that process with the announcement of the sale of its wireless carrier equipment divisions to Nokia Siemens Networks for $650 million.Nortel has acknowledged that its other divisions, including Enterprise Solutions, will also be sold off, and rumors continue to fly about a sale of Enterprise being imminent, but nothing had been announced as of Sunday night.
Here's the key quote from CEO Mike Zafirovski:
Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority. We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible. This will ensure Nortel's strong assets - technologies, customer relationships, and employees - continue to play an important role in driving the future of communications.
Like the earlier sale of Nortel's Enterprise Layer 4-7 data products division, the sale of the carrier wireless units involves a "stalking horse" purchaser, which means that another buyer could attempt to top Nokia Siemens Networks' $650 million bid.
As he has throughout the Nortel affair, the Ottawa Citizen's James Bagnall has excellent coverage, with this article summing up Nortel's many mistakes, missed opportunities and failed initiatives. Also, the Wall Street Journal has an article that speculates the Enterprise division could go for less than $500 million (subscription required).
So who will acquire Nortel Enterprise? The two most-frequently mentioned names are Avaya and Siemens Enterprise. Avaya's private equity owners, Silver Lake and TPG, still have to dig out from the $8 billion they paid for Avaya. On the other hand, if Nortel Enterprise is on the block at fire sale rates, maybe they figure it's worthwhile to buy the market share. Maybe it's Avaya's last, best hope to stay in the running with Cisco and Microsoft.
As for Siemens Enterprise, the departure of CEO Jim O'Neill, with no clear direction forthcoming about long-term succession, might suggest some uncertainty. To me, though, it seems likely that a Nortel buy is the plan for Siemens Enterprise. The man who's stepped into O'Neill's job is Mark Stone, an exec from the Gores Group, the private equity company that bought Siemens last year. It'd make sense that he's stepped in for the primary purpose of snagging Nortel Enterprise and putting in place the plan for integrating the two organizations.
So the question is, Who wants Nortel Enterprise most? Avaya? Siemens Enterprise? Or someone else?