Nortel in Asset Sale Talks

What is happening atleast in the Nortel office in India is that managers have been asked to prepare for re-badging. And people are hinting that the new employer is going to be Avaya.

Something is going on with Enterprise … people managers’ have been requested to sign-off internal NDAs to learn about the current situation … keep watching for the news …

Here is the WSJ article : http://209.85.173.132/search?q=cache:OX9Rz_LNwy...

Nortel also is in talks to sell the unit that sells wireless voice gear to rivals, including Nokia Siemens Networks, which long has sought to expand its presence in the U.S. Nokia Siemens is a joint venture of Nokia Corp. of Finland and Siemens.

I will say this if the above happens it does look like nortel will come out of bankruptcy protection with no debt, no creditor owing, and money in the bank plus revenues forthcoming with the new entity established, whether that be a new name company or same old nortel name.
That looks to be the way it is going.
Tell me why I am wrong?

i personally think they will get out of bankruptcy under the same name as soon as they deal with these creditors.

Some of these divisions everyone is saying nortel will sell are more of a liability than an asset in the long run. nonetheless i think they will generate enough money to take out these creditors.

They will not go under.

If were're spectulating then I'll give it a go.

MEN was supposed to bring $2 billion, and it was offered around $400 billion by Huawei. So I am going to use that math for the Carrier business.

Assume Carrier is worth about $5 billion. So, putting this in excel to solve for x (the value of the carrier business if it is sold by the same people who tried to sell MEN) yields :
(2,000,000,000/400,000,000)*(5,000,000,000/x)
x = 1,000,000,000

Therefore the value of the Carrier business will yield $1 billion when it is sold in early April.

I think the MEN sale is a smokescreen. I write this because I think Hackney will try to run a coup and keep the Nortel name with just the MEN business without all the other "baggage" using the sale of Carrier to pay off as much of the creditors as is possible.

i think you are mistaken. they put MEN up for 1 billion. lets assume that your $400 million is corrent. the new formula which i think is more in line with reality is the following...

(1,000,000,000/400,000,000)*(5,000,000,000/x)
x = 2,000,000,000

Moch my words. Carrier will sell for about 2.7 billion.

now lets go to the next division? what's your estimate for that?

I didn't say that Nortel will sell any divisions. I am saying that Nortel will sell the business.

The paper contracts.

Why would any company take on thousands Nortel employees who don't have any severance plan, and put them them on theirs? To pay them which they figure out what to do with them?

I dont know if they will sell just that division or exactly how much for. I think they will sell a few divisions and the carrier can even get 2.7-3 billion dollars from what i read on the internet and what others are saying on the internet.

My information comes strictly from what i read in articles/blogs on the internet. But If they sell off a few divisions they can let the other new company lay off as many employees as they want.

My guess is that all employees not wanted will be laid off before selling the division/LOB/whatever so that the new company doesn't have to pay them

Jo,

Those businesses are already for sale. I don't think layoffs will happen any faster or any slower than what is laid out by mgmnt up until a deal is reached. At that point and especially if the transaction is expected to close quickly, layoffs will likely stop.

Look at it this way, once you've sold your house, why give it a coat of paint? I've seen banks acquire banks to later determine which branches should close and which employees to fire. Usually, the acquiring company will factor into their offer any subsequent restructuring charges. Remember, both sides have experienced counsel and it's only the employees who are the chumps.

You're a shill.

anyone else think the following...?

1. Nortel will sell divisions and generate billions of $$
2. The creditors will be paid off
3. Nortel will emerge from bankruptcy and the stock price will rise.

Billions for the divisions???!!! Did you read newspapers lately???

read it and weep.
The market price for these divisions is about $10 billion i think. what do you think?

"The company is fielding offers from potential buyers who are interested in purchasing both its wireless-gear business as well as a separate division that manufactures office telecom equipment. Together, those two divisions posted $6.7-billion in revenue last year, or more than half the company's sales."

There is no way somebody pays $10B for those divisions...Nortel wanted to get $ 1B for MEN and nobody wants to pays half of that....

wats the formula then?

isnt it 40% of revenue plus wat nortel invested in the divisions? I heared they invested billions into these divisions, on top of that they are worth billions. A good 5 billion they can get to take out the creditors and some company liabilites.

Some of these divisions are liabilities in restructing. its worth to get rid of them. what do u think they can get on them?

you have to examine the numbers carefully here.
Yes the two businesses combined to earn 6.7 bilion in revenue last year..but they spent just as much to get that revenue. In other words nortel had 10 to 11 billion is sales but had a bigger debt than that!!
Like spending 101 dollars to make 100.
That is why they had to go into bankruptcy protection.
Ergo..if the business are sold standalone in this market they would be lucky to get 3 billion for both combined. That money goes to the creditors and lawyers. The big banks, CM's, etc. The ex rank and file employees will get nothing. Nortel could then resurrect but a condition would have to be that any future revenues from the new nortel or what is left would be exempt regarding payment to creditors.

i agree. i just dont know about the 3 billion for both combined as you say.

I really do think its more like 4-5 billion. just enough to get rid of the cancer. The creditors.

Be serious guys ! UMTS was sold in 2006 at 220 M$ if I remember well when Gartner was estimating this at 500 M$ before the deal. And market conditions were not so bad at the time. So seriously, my guess is that all bidders together will not put more than 1.5B$ in cash on the table for ALL Nortel pieces in the current financial / market conditions. And secured creditors should accept.

i dont know exactly h ow much they will sell for. But some people on the net have been speculating for a while now its in the 2-3 billion range.

Nop...look this: http://www.allaboutnortel.com/2009/03/13/whats-...

" In terms of what Nortel could get for its wireless and enterprise units, the Globe & Mail is suggesting $1.3-billion"

you are probably right.

I was interested to see Avaya mentioned as a buyer for enterprise.

There are probably good financial reasons for this but the overlap in voice products will be a disaster for the enlarged Avaya and for their customers (both old Avaya and old Nortel).

Cisco and the other VoIP/PBX suppliers will eat them alive.

Only an investment banker/private equity investor could dream up such a dumb move. A disaster in the making.

You may want to look at the Nortel AS5300 -- It will rival anything other VOIP vendors have out there. Check it out - one of the few products designed based on actual customer requirements. Avaya would be making a great move - they'd get the Nortel install base and access to technology (AS5300) which would give them a huge base (Avaya's current and Nortel's) to sell the AS5300 into.

AS5300, nor AS5200 nor MCS5100 have generated enough $$$ after years of trying and millions spent in R&D. They had the first mover advantage many years ago, but Nortel penalized its own product. Just two examples:
Nortel positioned MCS5100 as a multimedia attachment of the legacy CS1000 instead of a evolution. In the mean time, Cisco have surpassed Nortel in total number of VoIP ports...
After failing miserably with MCS, Nortel made an alliance with Microsoft to position OCS as a multimedia attachment of CS1000, but MS is now position OCS a PBX replacement...So Microsoft is doing what Nortel does not have the guts to do many years ago: propose to CS1000 customer replacing its legacy PBX for an innovative SIP based multimedia platform...Now, it is too late, it is a two horse racing between MS and CSCO....

I'm not so sure the overlap would a long term problem. I think you would see a fairly quick culling of the portfolio to reduce or eliminate the overlap. Some products would sold off or put into 'sustain only' mode and incentives would be given to customers to transition. There would be a rationalization of the product and sales teams.

With Giancarlo as Chairman and Kennedi as CEO, I could see this happening.

Another note: the KEIP payouts for all the execs have a big component for success in selling off businesses.

Why the assets sell off make sense :

1) In the past months all the information related by the medias, despite the deny of the execs, appeared as correct (the last one the bankruptcy).
2) How to rebuild the customer confidence, if the ship is driven by incompetents and liars ? The solution is to sell off to a more believable company.

My comments:

- selling the pieces makes more sense than trying to operate a sub-critical-mass full line telecom equipment supplier
- my sources tell me that the story is true, Nortel is trying to sell any and all of its businesses

The Z man didn't deny it!

Can anyone with real knowledge of this business make a list of all their units which will possibly be sold and list an estimate of how much $$ each will most likely sell for.

I think many of us on this blog need this to get a rough idea of how much money they will generate in cash to pay off those creditors.

Thanks :)

is it too much to dream that shareholders of NRTLQ would get anything from this sale??? possibly?

If they generate billions of dollars from the divisions sales i dont see why they can't emerge from bankruptcy. Meaning the stock will go up.

Z just sent an email on the subject, as usual the content is empty !

I see Nortel emerging as a (self-)recognized leader in green technologies. Paint yer cables green, put "Nortel certified green" stickers on your computers, print and distribute "we are green" leaflets on recycled stock made in India. G-g-g-golly.

wonder if a takeover could be the best thing to happen for employees of this forever struggling company... if the buyers take on most of the employees that is...

Too bad. I hope at least some of the worthwhile assets can be recovered by the scavengers.

The back of the nortel brand has been broken on the shoals of incompetent and greedy leadership.

It started with the drunken sailor roth, continued with the pirates dunn and owens and was completed by the current ship of fools. All of this malfeasance right under the beaks of the sleeping parrots on the BoD.

Many, agreed. Thank you!

Looks like Doug Wolff has jumped over to Alcatel Lucent.

Typical Nortel we find out via this website and other major press organisations about the future of our company whilst these clowns and jokers running the business do nothing and pass no information at all to the people down below.

If the rumors are true, we will soon be able to jettison Mike Z and his GEnius cronies off to "low cost" centers. Forever.

It can be funny if it was not so sad...

Nortel had the chance of buying both Avaya and Siemens Enterprise, both chances screwed up by Z and his big ego...
Gary had a plan to merge with Nokia way before Nokia Siemens merger, and that chance was screwed up by the Almirant and the BoD...

Now the once targets to be bought/mergered are buying Nortel assets by pennies on the dollar....

Only Z and his GEniuses can accomplish that in less than 3 years...<sarcasm/>

Back last fall, Nortel went through a reorganization of sorts where they reverted to the siloed approach making each business unit a separate entity and thereby allowing each business unit to report earnings separately.. For a short period of time prior to this everything was organized horizontally rather than vertically and each business unit was absorbed into the larger Nortel. The speculation internally was that reorganizing into distinctive business units at that time in particular was in preparation to sell off pieces of the company.

It'd be nice if we all could read the WSJ article ...

You can read this instead, they both are same: http://business.theglobeandmail.com/servlet/sto...

Thank you. It's frustrating when you can't access articles.

“What we are finding is that there may be a lot more value by selling rather than emerging,” said an unnamed source quoted by the paper. “The company was surprised by the amount of interest and the number of calls.”


This story carries alot of credibility,because basically what Nortel's creditors are saying is that after they shopped around Nortel's assets to parties that may have shown interest,all of them have hinted that these assets may be of value to us only because of the fact that none of the current and incompetent management would be going along with the sale of these assets should they indeed be sold to interested buyers,hence the "more valuable by selling rather than emerging".

In fact Nortel as is without any of the current management involved would automatically go up in value.

Stay tuned as I will post a series of statements made by Z over the last three years that have turned out to be nothing short of an embarrassment for him-one of his last statements were ....""Nortel must be put on a sound financial footing once and for all," said Zafirovski, !

I'm sure some will enjoy a good laugh from Z's statements.

Well I see the word again "imminent" we all know what that means, along with Pavi saying "everything is on the table". The board has not put any incentive in front of executive management (term used loosely) to bring the company out of Ch-11, no one wants to wait for a plan to be developed, be issued shares when they can pull the pin and cash out now, Hackman and Z walk with millions and go on to the next gig.

Those that can, build; those that can’t, chop—an old Macedonian proverb..--bb

Those who can't do either loot the company and go bankrupt

Well said,,--bb

Being in a LOB that has the potential of being sold off has a certain appeal that continuing with the current leadership lacks. Even if an individual employee's life expectancy post-sale may be questionable, it has to be an improvement over their current condition.

Agreed completely. Most of my peers agree that we'd rather take a chance on another company, ANY company, buying our division and letting the chips fall where they may rather than remaining a part of Nortel if Z and his GEniuses remain at the helm.

Enterprise is done. Siemans/Gores will be the buyer. Joel and Z are in EMEA this week meeting with them. Don't believe me, call a few of the Nortel-approved London hotels and you will find them checked in and planning the sale.

Nokia Siemens is also interested in the Wireless divisions... I wonder if Siemens gets Enterprise and NSN gets wireless

Hope the Germans have good sense of humour especially when they are viewing DJ's clips

thats why they drink a lot alc - it legally permits them to laugh

lol, they will need huge sense of humor lol

Now THAT is an interesting point to consider.....

Ha ha ha ha!

Maybe this time around, the asset sales will materialize indeed and some employees can be spared from job losses without severance.

I remember back on Q408 when Mark had shared with us that he had it on very good word that IBM was interested in part of NT. I just hope that the WSJ author's sources are more credible.

I think Siemens (Gores) would be better for those still at Nortel. Avaya (Silverlake) would probably just want it to die. Either way, how long does anyone think the Hackner would last?

I'm thinking Avaya would be just after the Ethernet/Switching there is too much overlap in the other product areas.

Silverlake is doing the due diligence right now to acquire the enterprise division. They will combine it with Avaya.

Hmm...what will happen to allaboutnortel.com? We would need to start a new allaboutsomething else :-)

Scalpcutter, you have it below in your analysis, and you`ve hit it on the head. Suspect MEN might either be spun off, or be sold at fire sale prices, or at the worst, folded. The others will occur as you noted, this always made the most sense.

This is it for Nortel, sad to see it happen this way, couldn`t see them coming out of bankruptcy with any hope of market share, or building up to it.

Makes you wonder when they say there may be alot more value selling rather than re-emerging. I take it that is what the creditors are saying.
What other explanation could there be?

There is a lot of merit in your statement as cash contribution against total debt is a huge issue given the current economy. If you can reduce the total debt through cash then you can reduce total new equity (and risk) as they emerge from bankruptcy protection.

There is still the Carrier Voice business and Optical business to consider. Nortel has a lot of strength and share in both of these markets. They would be a much smaller company (like Sonus or Cienna) but they would have a business that generated 2008 revenues of $1.937 Billion. Compare that against the combined revenues of Sonus + Cienna of about $1.26 Billion, a decent business model can be built.

Why are you patronizing with "a lot of merit" like you are a good judge let alone elaborate totally contrary to the message.

He said the creditors may see "more value selling rather than re-emerging" contrary to any restructuring fairy tale.

Then take this opportunity to pump emerging from bankruptcy with, "If you can reduce the total debt through cash then you can reduce total new equity (and risk) as they emerge from bankruptcy protection."

huh? What "if", What new equity? What debt reduction? What emerge from bankruptcy protection, to neglecting the very news and his post altogether.

They must sell any part of this depreciating machine on its way to the salvage yard to pay as much of the mechanic's lien before disappearing altogether, get it yet? Expect even the declining Carrier you mentioned to be on the auction block.

Consider margins on remaining tanking units and what would be left after 4.5B debt + 3B pensions + severances, etc., growing amid declining business and declining cash ...let alone comparing this corpse to Sonus or Cienna who are not facing bankruptcy or fraud trials

The artsy have a nice day and buy all you can over the years has proven grossly misleading, they are delisted and headed to a traditional ch.7 bankruptcy, denying severances, grounding their jet, recycling coffee cups, gagging employees/shareholders/analysts, while downplaying folding to fold , ask for more bonuses or trade options for cash etc... it is endless...

Cienna and Sonus have smart people with domain chops running those business, care to name any 'world-classers' with same qualifications?..--bb

Just a couple of potholes ahead for Carrier VoIP...the first is that sales for 2009 and perhaps 2010 as well are expected to decrease due to the economy and pothole # 2 will be getting around Cisco

hmm, maybe this is why Doug Wolff (GM LTE) walked out earlier this week...

Also note that Gores has past history picking up older NT assets; they bought the Millennium payphone product group back in ~2000.

I too wondered about that. I see at least two possibilities:

1) Wolff believed or knew that LTE is doomed (will be cut) so jumped ship.

2) Wolff believed or knew that a sale of LTE (and perhaps other Wireless products) was in the works, and that he would not have a position by the acquirer.

For the sake of the Wireless folks, I hope it is option #2 and that LTE (and other assets) will be sold, and that the large majority of employees will carry over to the new company (similar to the AlcaLucent purchase of UMTS).

Hopefully this means that Lowe will finally retire and do no more damage.

Does anyone know for sure where Doug Wolff went and why?

Well there you have it.
One certainty this day and age is the accuracy of media reports long before the rank and file are told what will happen.
I am not being sarcastic saying this.
I believe what the WSJ reported will indeed happen. Reputable organization.
So let's look at that what that means for the four lines of business Nortel now has morphed into.
- Carrier Networks (wireless)......Sold.
- Enterprise (joel)...........................Sold
- LG/Nortel Joint Venture..............Nortel sellout to LG totally???
- MEN...............................................??? Current Sale on Hold.
Will MEN go back on the block?
Will buyers buy wireless and enterprise?
I suspect the longer nothing said the more likely the nortanic will split up and sell what it can. If a LOB cannot be sold it is left to go into Chapter 7 when Nortel
enters bankrupty at which time the vultures come in.
One thing is for certain.
An article like this from the WSJ will prompt a quick reply from Mike Z and all the lines of business chiefs sooner, rather than later.
It really does get more confusing for those poor folks at Nortel every day.
I don't know how anybody could think anything but chapter 7 and lines of business must HOPE they get sold.
I guess that is the Vision Mike has to share with everyone?
Stay Tuned. As the world Turns!!

I agree, but I don't see the urgency to respond. Nortel has been very clear that "everything is on the table" we have heard that time and time again.

That's not true.
The only LOB that has been officially told, and publicly broadcast that they "were" up for sale was MEN. Since then they put the sale on hold.
Enterprise, LG/Nortel and Wireless never had that publically stated.
Saying "everything is on the table" did not equal the selling off of Enterprise and Wireless or the JV to this point anyway.

Everyone knows they have seeked assistance from the investment banker to look for potential buyers..
http://www.ottawacitizen.com/Business/Someone+m...

However as with MEN, they can't sell anything up until now due to the insistence of including their execs with the deal. Now that they have successfully devised a backdoor way to get their money (hello KEIP!), the couldn't care less if they would stay or not...The "getting back to the sound financial footing" is just the smoke and mirror by Z and Pavi.

Once the buyers are found, they will cut the meat according to the buyers specs , get rid of junks then wrap it in box for delivery..Objectives met, bonus money in their pockets...

These guys are from the old school...they are not that stupid after all.

However as with MEN, they can't sell anything up until now due to the insistence of including their execs with the deal. Now that they have successfully devised a backdoor way to get their money (hello KEIP!)

That's exactly why they are pushing hard for the KEIP bonuses,as they know that they don't have the security of executive employment if their creditors are told by potential buyers that the only way they will buy Nortel assets is if they are left behind.

Nortel management is no longer in the driver's seat and that is why we are hearing things coming from the media rather than Nortel's PR department.

All of Carrier Networks sold or minus GSM, LTE? What about VOIP? Any thoughts? LG/NT LTE PHY development and NT LTE PHY development are joined at the hip, how would this be dealt with if NT sells out to LG on JV? If NT got out of LG/NT JV would LG acquire some NT LTE or optical assets including developers? Are NSN interested in NT LTE assets? ...

I've previously stated that I do not think Nortel can be successful post-restructuring while retaining all of their existing business units. A sale of one or more units would be required for the opportunity of future success. I think that Enterprise is the most likely to be acquired and I think that the JV of The Gores Group and Siemens Enterprise is the most likely candidate.

On the Enterasys.com website (owned by The Gores Group) there is an open letter which states "Gores and Siemens plan to invest at least €350 million in the joint venture in order to launch innovative new products, acquire other technology platforms, and further drive the expansion of the business."

Nortel Enterprise would bring install base customers, especially in North America, UC technologies and a decent sales, channel and distribution model that can be leveraged globally. In return, for those with strong interest in technology, Nortel's UC solutions are complimentary to the Siemens OpenScape UC offerings.

The Siemens Balance Sheet holds over $7.5 Billion USD in cash. They could easily afford to offer substantial funding to either acquisition which in turn increases their positions in the joint ventures and their ability to increase their profitability fees from either of the JVs.

Who knows what can or will happen but I am not surprised in the least about this recent statement.

Avaya? Read the history and you will see the name Silverlake come up multiple times. http://www.silverlake.com/partners/content.php?... Pretty good fit without current leadership.