More: Nortel-Motorola

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By Mark Evans | February 1, 2008

It’s good to see Canada’s national newspaper, the Globe & Mail, finally pick up on the news that Motorola may be dumping its handset business.

The story quotes RBC analyst Mark Sue that Motorola’s network equipment business could be attractive to Nortel.

While Motorola’s handset business is struggling, the G&M reports that other parts of the business are doing relatively well. Motorola’s home and networks mobility unit had a 9% rise in sales last year to $10-billion and operating profit of $709-million, while wireless sales to enterprise customers made an operating profit of $1.2-billion on sales of $7.7-billion.

If Motorola does push forward with a sale, the question is whether is sets the stage for a takeover. After all, a healthier, more profitable Motorola will surely attract the interest of suitors - at least, in theory. Then again, it would be a huge move at a time when the private equity landscape is looking increasingly unstable amid credit and recession concerns.

For Nortel, the issue is whether is has the capacity to do a deal given the complexities of putting together two massive businesses that would involve be extensive restructuring. Even with the sale of its handset business, Motorola would be almost twice as big as Nortel so Nortel would likely disappear as a Canadian company - something the Canadian government would be reluctant to see given how much financial support it has poured into the country’s flagship high-tech company.

Source: Wall St. Journal