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Nortel ES President Speaks to Analysts/Consultants

Joel Hackney, President, Nortel Enterprise Solutions (ES) spoke to industry analysts and consultants via a webcast on Monday afternoon. The topic, of course, was the $475 million "stalking horse" bid by Avaya to assume the assets and shares (for DiamondWare LTD) owned by the Nortel enterprise business, including $28 million of debt. The following are my notes from the call:Hackney said that Nortel sees the Avaya bid as being in its best interest and said it was retaining strong market share during the first half of this year. He stressed that the consolidation would be healthy for the industry with a clear process and timetable to go forward. Nortel has shown strong progress and growth in the recent quarter compared to the first quarter of this year, due to its very loyal customer base, rumors to the contrary.

Nortel will file the Avaya bid proposal the first week of August, according to "stalking horse" rules, and by mid-September (September 15 is a target date) the final winner for Nortel ES will be announced. Customers will know the future of the Nortel ES business to go forward in the future.

Hackney could not disclose who the other bidders for Nortel ES are, but expects the "stalking horse" process to be competitive.

Avaya is strongly interested in Nortel ES channels and it is an important reason for the bid. The merged company would hope to expand on both suppliers' installed customer bases. Nortel knows the ultimate winning bidder may not be Avaya, but believes that the two companies combined will be stronger on a global basis.

Regarding the SMB market, Avaya would leverage the best technology Nortel has to offer, Hackney said. Specifics regarding product platform retention were not disclosed, but discussions have been held between the companies; both are deemed leaders in UC architectures with the ability to merge the products. The ICA relationship with Microsoft will continue and momentum continues to grow.

Certified dealer partners will be integrated into the new merged company environment. Nortel has been continually updating its certification processes in recognition of the changing market environment.

A merger would include all existing Nortel ES products in the portfolio that the customer base has purchased and been dependent on.

Detailed integration plans for services are too immature to discuss, but the value of Nortel ES for its customer base will be strengthened. Details will be discussed at a later date when appropriate.

If a seemingly more beneficial offer comes forward, the Nortel creditor committee and the bankruptcy court will evaluate it.

The Nortel ES team is strongly committed to go forward and support the customer base; they are highly focused and ready to build on current momentum, Hackney said.

The CS 2100, a carrier-based enterprise solution, is included as part of the Avaya deal, and existing customers will be fully protected.

A question regarding employee headcount could not be addressed in detail, but Hackney said that Nortel ES employees have been told that the ultimate integration plans would be revealed soon based on an aggressive timeline.