Nortel in Asset Sale Talks

By Mark Evans | Published: March 11, 2009

Nortel
It looks like the New Nortel (post-bankruptcy restructuring) could be a lot smaller (or exist at all) amid reports (via the Wall St. Journal) that Nortel is in discussions to sell its wireless and enterprise business.

“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.”

The WSJ said Nortel has held talks with potential buyers including Avaya Inc. about enterprise business, and talks with Nokia Siemens Networks about the wireless business.

Nortel spokeman Mohammed Nakhooda declined to comment.

“We’ve indicated in the past that we’re going to build a plan and that once we have that plan in place we’re going to present it to the courts,” he told the Globe & Mail. “Right now, we’re in the early stages of building that plan, but we’re making progress. Time is obviously of the essence and we’re moving as quickly as we can with speed and purpose.”

More: GigaOm has some thoughts on the New Nortel.

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  • felixmk

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

  • joremero

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

  • Ex_CS1000

    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.

  • Purpletip

    Many, agreed. Thank you!

  • Another_Nortel_Watcher

    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.

  • sunnygrace

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

  • Casual Observer

    My oh my…looks like the bondholders want their 20 cents on the dollar and just walk with whatever cash they can get. Chapter 7 can’t be far off. The numbers for Q1 must be really bad. So trying to sell the asset before that information is disclosed is the best thing to do. Any buyers would be better off waiting another month or so before putting in their bids. Then they will have the latest revenue data so they can properly value Nortel.

  • danman

    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.

  • danman

    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.

  • Purpletip

    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.

  • NortelSouth

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

  • danman

    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.”

  • NortelSouth

    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….

  • NortelSouth

    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….

  • danman

    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?

  • scalpcutter

    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.

  • danman

    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.

  • WhySoSerious

    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.

  • danman

    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?

  • WhySoSerious

    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?

  • danman

    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.

  • WhySoSerious

    You're a shill.

  • scalpcutter

    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?

  • WhySoSerious

    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.

  • danman

    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.

  • NortelGal

    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.

  • joremero

    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

  • Nortel watcher

    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.

  • stinkyfoot

    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.

  • scalpcutter

    you are probably right.

  • betoX

    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 …

  • danman

    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.

  • NortelSouth

    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”

  • godstypo

    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.

  • danman

    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.

  • NortelSouth

    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”

  • godstypo

    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.

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