When Nortel filed for bankruptcy protection in January executives made it very clear that the company planned to emerge from Chapter 11 like so many other financially struggling businesses have done. Changes would of course need to be made to the company and Nortel would certainly look quite different. But the plan was for Nortel to still be in business in at least some of its core markets.However, in the past few weeks it has become increasingly clear that Nortel's enterprise business is very much on the block. Some news outlets report that Nortel's enterprise unit could be sold by the end of this month. Avaya, Siemens Enterprise Communications, and Aspect Software's owner Golden Gate Capital are said to have each placed bids for the business unit responsible for Nortel's PBX products, unified communications solutions, messaging software, data switches, routers, wireless networking gear, and security products. (And with Nokia Siemens Networks looking to take over Nortel's carrier wireless business, it is unclear precisely what part of Nortel would actually be left to emerge from Chapter 11.)
It remains to be seen which, if any, of these companies will in fact purchase Nortel's enterprise business ... and I'm not pretending to be privy to any inside information that would indicate which direction this particular pendulum is going swing. But I thought it would be of interest to examine the pros and cons of each of these potential pairings to see how valuable each would be. And since I'm such a branding wizard I'll work my magic and suggest a few names for the combined companies.
Norvaya. At the business level, an Avaya acquisition of Nortel's enterprise business would allow it to eliminate once and for all its hereditary enemy in the business communications market. It would have the double benefit of keeping Siemens Enterprise marginalized in North American, since Siemens would not be able to use its own acquisition of Nortel as a means of building up a stronger market position in the U.S. Avaya would also dramatically increase its North American customer base, a notable portion of which Cisco had uncharitably poached over the past decade. In other words, a combined Avaya-Nortel would be able to put up a united front against Cisco's marketing might and technology prowess. At a product level, Avaya would gain data networking, wireless infrastructure, and security solutions by and large absent from its portfolio. Avaya's services organization would grow considerably in size and would add substantial resources familiar with Microsoft and IBM unified communications solutions. At the same time, there would be considerable product overlap. Nortel's entire communications portfolio essentially overlaps with that of Avaya. There would have to be roadmaps and rationalizations aplenty to eliminate duplicate solution sets. This would very likely be a years-long process that could see significant customer and channel partner fallout along the way. On the upside, Silver Lake and TPG are not merging Avaya with any of their other holdings, so Avaya would be able to concentrate solely on merging with Nortel.
Nortmens. Much of the advantages of an Avaya-Nortel pairing would likewise hold true if Siemens Enterprise were the winning bidder. Elimination of a competitor, larger customer base, bolstered services offerings, a united front against Cisco--these are all things that would greatly benefit Siemens. Added to this, Siemens would gain a better toehold in North America. The company has long been frustrated in its ability to ramp up sales in the region, and an acquisition of Nortel's enterprise group could be just the ticket for building a U.S. market share comparable to what Siemens enjoys in Europe. Product overlap issues, however, would be intense. As with an Avaya-Nortel mash-up, pretty much all of Siemens Enterprise's comms portfolio competes directly with Nortel PBX, UC, messaging, wireless networking and other product classes. Adding to the complexity would be the fact that for the past year Siemens Enterprise has been busily integrating business operations and product lines with Enterasys and SER, two other Gores Group companies with highly complementary portfolios. Nortel's data networking gear would overlap with much of what Enterasys has on offer, while Nortel contact center solutions at least in part overlap with SER offerings. Siemens Enterprise purchasing Nortel's enterprise assets would make an already complicated company integration initiative even more complicated.
Norspect. Among the three most prominent acquisition possibilities, this is the most complementary both business- and product-wise. There is certainly overlap between Nortel and Aspect's contact center portfolios, the two companies being direct competitors in the market for customer service software and solutions. But this is pretty much where product overlap would begin and end. Golden Gate Capital could integrate Aspect and Nortel into one cohesive whole, much like Gores is doing with Siemens Enterprise, Enterasys and SER. Or the private equity firm could operate the two more or less separately, much like Genesys operates independently within Alcatel-Lucent. Nortel and Aspect's attitudes toward and relationships with Microsoft are also highly complementary. The Nortel-Microsoft Innovative Communications Alliance remains intact as Nortel reorganizes under Chapter 11. Aspect also maintains a strategic alliance with Microsoft. For the past year the company has been very active in integrating its contact center solutions with Microsoft's Office Communications Server (OCS) 2007 platform. Microsoft lately been deemphasizing integrations between its unified communications software and third-party PBXs, but the company will in fact need to integrate OCS with PBXs, and a combined Nortel-Aspect as a business partner could be a great asset.
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