Nokia Siemens Plays Nice with Canada
By Mark Evans | July 2, 2009
Nokia Siemens Networks’ efforts to win public support for its $650-million bid for Nortel’s CDMA wireless business and LTE R&D unit went on the offensive yesterday when NSN CFO Luca Maestri told a press conference in Toronto that the company not only plans to keep all 800 wireless jobs in Canada but add more as its makes Canada a global “next-generation wireless development” centre.
“I made it very clear we want to make it the centre of excellence for LTE technology for us,” Mr. Maestri told the National Post. “We really want to keep Ottawa as a centre of excellence — it is going to be a global centre.”
Nokia has a vested interest in keeping jobs in Canada given Export Development Canada, a Crown agency, is providing $300-million of financing to support the company’s bid.
While there is a possibility that another bidder may emerge for Nortel’s CDMA business and LTE R&D unit, Nokia is clearly hoping that it can win approval to expand its North American foothold.
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The Value of Nortel’s LTE Patents?
By Mark Evans | July 2, 2009
Nortel may be trying to sell its LTE R&D unit to Nokia Siemens but there’s a lot of chatter about what’s not part of the deal: some LTE patents.
The talk was triggered by a recent estimate from JP Morgan Chase analyst Ehud Gelblum could be worth as much as $2.9-billion in terms of royalty payments.
According to LightReading, Gelblum calculates that “if Nortel (or whoever ends up owning the IPR) collects 1% of every relevant LTE device sale price in the coming years (based on the assumption that LTE has a lifespan of 15 years and with a 10% discount rate), the IPR is worth just over $2.9 billion.”
The $2.9-billion, however, was poo-pooed by Stuart Carlaw, VIP and chief research officer with ABI Research. He told Telecoms.com that the figure is “somewhat overblown” because he believes Gelblum’s assumption is flawed.
“This is disproportionate to their patent holdings and cannot be seen as fair and reasonable. I doubt any other single vendor will be looking for this type of return - even Qualcomm,” Carlaw told Telecoms.com.
Putting aside who might be right, the reality is the LTE patents may have a lot of value - just as Nortel’s cash-cow CDMA wireless business has a lot of value that Nokia is getting for a song.
This may explain why some investors may be starting to look at Nortel as a fertile opportunity to acquire some attractive assets stuck within a struggling business.
Update: The Ottawa Citizen has a story looking at the value of Nortel’s business units on the block.
A Bid to Save Nortel?
By Mark Evans | July 1, 2009
Is there hope for Nortel to continue as a standalone company without going through a firesale of all its best assets?
The Ottawa Citizen reports that MatlinPatterson Global Advisors, a $9-billion private equity investor, may be interested in bidding for Nortel.
MatlinPatterson’s biggest obstacle could be a lack of time it has to put together a bid by July 21 in time for a court-approved auction on July 24 of Nortel’s CDMA wireless business, which has attracted an offer from Nokia Siemens.
Whether or not MatlinPatterson can pull together a bid for Nortel is uncertain, it puts the spotlight on whether Nortel could have survived by going through a restructuring process that let it shed assets, facilities and employees while leaving it with an operating structure and business units to become a viable, albeit smaller, player.
Without having any insight into the restructuring process, Nortel’s senior management and board are taking the easy way out. Why not go out with a fight rather than bending over backwards to the demands of creditors? Sure, creditors want their pound of flesh but there has to be a better option than abandoning ship and casting assets overboard.
Instead, CEO Mike Zafirovski and his team are tossing in the towel after three years of bad choices, strategic mistakes and organizational paralysis.
If Nortel’s board had any chutzpah, they would consider giving another senior management team a shot of remaking Nortel instead of letting it blown up into smithereens.
Of course, the board has done little over the past decade to suggest it knows a better way so let’s not expect miracles now.
If MatlinPatterson can save Nortel and make a few bucks along the way, more power to it.
More: The Telecom Blog has a good post questioning why anyone would want to buy Nortel’s enterprise business.
Topics: Financials, M&A | Comments
Let’s Resurrect Bay Networks
By Mark Evans | July 1, 2009
It looks John McHugh, VP, enterprise data solutions with Nortel’s enterprise business, looks to be getting his ducks lined for a new employer amid rumors the business could soon be sold to Avaya for $500-million.
In an interesting interview with Network World’s Tim Greene, McHugh suggests that Nortel should bring back the Bay Networks brand, which disappeared soon after Nortel purchased Bay for $9.1-billion at the peak of the telecom boom.
“The more independently I can run this business and take it back to its roots and make Bay Networks exist again, the more effective and focused we are going to be,” he said. “I would like Nortel to reincarnate Bay Networks.”
In what can only been be seen as a not-so-subtle criticism of Nortel’s senior management team, McHugh said part of the enterprise unit’s problems has been “the parent company doesn’t understand how important data networking equipment is from a customer perspective. There was a higher level strategic goal that we were peripheral participants in. We were a strategic afterthought.”
McHugh was hired by Nortel a year ago after 26 years with Hewlett-Packard,
http://www.networkworld.com/news/2009/063009-nortel-bay-mchugh.html
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Nokia’s Growing North American Foothold
By Mark Evans | June 30, 2009
For years, Nokia has been focused on getting a stronger foothold in North America so the proposed purchase of Nortel’s CDMA business is an important element in that strategy.
MarketWatch has a story looking at Nokia’s North American efforts. It includes this quote from Frost & Sullivan analyst Ronald Gruia that illustrates how sweet of a deal Nokia could get, and Nortel’s desperation to sell assets to appease creditors.
“In the near term, analysts expect Nokia-Siemens to use the Nortel wireless division as a cash cow. CDMA technology is slated to be phased out, but the process could take years and companies in the U.S. and Asia will still spend billions on maintenance.
Nokia-Siemens is also getting the division fairly cheaply - some analysts calculate it’s worth twice the agreed-upon price - and the unit is still quite profitable. In 2008, it generated $2.2 billion in sales. You still have a lot of milking left on that cow.”
Technorati Tags: nokia-siemens, nortel
Topics: Financials, M&A | Comments
Nortel Sunk by Customer Concerns
By Mark Evans | June 29, 2009
News alert: Nortel chief strategy officer, George Riedl, is alive and well. It’s been three years since Riedl was lured away from Juniper Networks where he had a reputation for acquisitions.
Over the past three years, however, Nortel has only made one major acquisition (Tasman Networks for $99-million) so it’s not like Riedl has been leading the M&A charge - or whether CEO Mike Zafirovski gave him the strategic freedom and mandate to make it happen.
Not surprisingly, Riedl’s profile has been pretty low. So, it was surprising to see him emerge at a hearing today focused on getting court approval for Nokia Siemens’ proposed $650-million purchase of Nortel’s CDMA business and LTE R&D unit.
Riedl said carriers love Nortel’s technology but were reluctant to do business with the company because of its uncertain financial future. He was quoted by Bloomberg as saying that customers told Nortel “we love your technology, but we are concerned about your balance sheet. Unfortunately for us, we will win the technology prize, but not the commercial business.”
He makes it sound like Nortel is the belle of the ball but can’t get anyone to dance with them. Of course, it’s a lot more complicated than that but that’s a long story for another time.
Technorati Tags: george riedl, MEN, mike zafirovski
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Manley Muses About Nortel’s Demise
By Mark Evans | June 28, 2009
The Financial Post ran an extensive cover story about Nortel’s decline yesterday, which recapped how Canada’s flagship high-tech company has fallen so dramatically over the past few years. There’s little that’s eye-opening but some quotes from Nortel director John Manley are, frankly stunning.
“It is a huge loss for Canada and for our Canadian research and development,” Manley said, adding that he is “personally and deeply saddened by what’s happened. And I am heartsick about the impact on individuals. One of the things that always impressed me about Nortel is the loyalty that employees, and former employees, had toward the company. It is a tragedy.”
With all due respect, shouldn’t Manley and his fellow board members be taking a healthy part of the blame for Nortel’s demise as opposed to lamenting about they are “saddened” that Nortel has decided to concede defeat by selling all of its assets at firesale prices?
Manley has been a Nortel director since 2004 so he’s been representing the best interests of shareholders for the past five years. During that time, the board has been responsible for approving the hiring of Bill Owens as CEO, a puzzling move given his lack of telecom experience.
The board also backed Owens rather than embrace an ambitious and aggressive makeover created by COO Gary Daichendt and chief technology officer Gary Kunis - a plan that may have changed Nortel’s fortunes. Daichendt and Kunis resigned after the board rejected their plans.
The board also hired Mike Zafirovski, who had never been the CEO of a Fortune 500 company.
And during Mike Z.’s three year reign, the board has watched as Mike Z. has suffered from a terrible and fatal case of strategic paralysis. While Mike Z. has fiddled with reducing costs, Nortel has burned. When Nortel needed a strong vision of the future and decisive strategic moves, Mike Z. has been unable to do what needed to be done.
At the end of the day, Manley and his fellow corporate directors will have to take their share of the blame.
If Manley was smart, he’d be wise to stay away from offering his condolences given he’s had a ringside seat to one of Canada’s biggest corporate declines.
Technorati Tags: john manley, mike zafirovski, nortel
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Nortel Gets Slammed for Nokia Deal
By Mark Evans | June 27, 2009
It’s fairly unanimous that Nokia Siemens got a great deal when it picked up Nortel’s CDMA business and LTE R&D unit for $650-million - especially given the CDMA business had a profit of $700-million last year (although that is expected to decline as the CDMA continues to go south).
Nortel entered into a “stalking horse” deal with Nokia Siemens, which means the door, in theory, is open for competitive bids - but only if it’s at least $5-million higher.
Creditors, however, who have an obvious vested interest in making sure Nortel gets as much as it can for its assets, filed an objection yesterday in a U.S. bankruptcy court. They claim the terms of the Nokia deal will “stifle, rather than encourage, active bidding”..
According to a Bloomberg story, if Nortel determines Nokia’s offer is not “materially different” from a rival’s offer, Nokia would automatically win the auction, even if the rival is willing to pay more, creditors claimed.
Technorati Tags: nortel
Is Avaya the Logical Buyer for Enterprise?
By Mark Evans | June 26, 2009
Now that Nortel’s CDMA and LTE businesses have been sold, Nortel’s top-notch restructuring team can focused its energy on dumping the company’s remaining assets - with the enterprise and Metro Ethernet Network units being at the top of the list.
Rumours abound that Avaya is poised to make a $500-million bid for the enterprise business. In theory, it’s a move that makes sense given it would strengthen Avaya’s competitive positive in the enterprise market, provide it with a larger customer base, and enhance its VoIP/IP portfolio.
Zeus Kerravala, an analyst with the Yankee Group, told Computerworld that an Avaya-Nortel deal is about Nortel’s customers, and getting to make the switch to Avaay gear.
“They’d want to upgrade the legacy and hybrid customers to IP,” he says. “That would be the question. Could they convert the customers fast enough before they go to another vendor?”
Topics: Financials, M&A | Comments
Who Wants a MEN?
By Mark Evans | June 25, 2009
With Nortel’s CDMA and LTE businesses in the process of being sold to Nokia Siemens, the next assets on the block are the enterprise and Metro Ethernet Network businesses.
LightReading’s Craig Matsumoto offers up a list of potential buyers for MEN.
Technorati Tags: nortel