Toronto's Globe and Mail quotes our own favorite Canadian-born analyst and resident blogger, Zeus Kerravala, as saying that Nortel's enterprise division could fetch as much as $1 billion if it's sold off, as reports are suggesting it may be.Zeus adds that this value could fall rapidly with the weak economy and the longer Nortel spends trying to peddle enterprise and wireless, the two divisions mentioned in this week's Wall Street Journal report that broke the news.
As I noted in my original post, Nortel agreed to sell its Layer 4-7 business to Radware for 34% of that division's annual revenues; if you apply that same percentage to enterprise voice, you come up with $558 million, and if you apply it to the entire enterprise portfolio, you come up with just about $800 million (after subtracting the Layer 4-7 revenues from the totals reported in Nortel's recent 4Q08 filing).
The other question is whether there'd be a bidding war. Both Avaya and Siemens are mentioned in the Journal article as having expressed interest in the enterprise division, and in the bankruptcy process, it's common for assets to be auctioned off to the highest bidder. Could that drive the price up? Would Avaya--or more precisely, Silver Lake and TPG, their private equity owners--go to the mat to acquire Nortel's enterprise division?
And for that matter, what's likely to be the fate of the data division, i.e., the former Bay Networks? Siemens' private equity owners, the Gores Group, might be interested in acquiring this portfolio and combining it with the Enterasys line that it already folded into Siemens Enterprise Communications. Then again, that's just another integration on top of the task of integrating Nortel voice into Siemens voice.
And Avaya would seem to have even less reason for interest in the data division. They went down that road before with the Cajun switch product line and wound up preferring the partner route, first with Extreme and, just recently, adding HP ProCurve. At this point, ProCurve might be the better avenue into enterprises than Nortel data switches; HP seems to have the momentum here.
So would the Nortel Layer 2-3 switching line wind up orphaned? Who would acquire it as a standalone?
Now, it's your turn. Take the poll:
