Here’s a guest post by Duncan Stewart looking at what Nortel could be post-restructuring:
Even before Nortel filed for bankruptcy in January it had put one of its divisions for sale. Therefore yesterday’s Wall Street Journal story that Nortel may sell large parts of its business came as little surprise to most people who follow the fortunes of Canada’s once-largest tech company.
Most corporations going through a restructuring under bankruptcy protection sell some assets in order to raise cash, appease debtors, and become more focused. Most of the time though, the bits that eventually get sold aren’t necessarily what was expected when the selling process began.
My parents have had a lot of garage sales. I suspect they have made almost as much money over the years from selling things that theoretically weren’t for sale as from the items with price tags on them. So too with Nortel: although Metro Ethernet Networks was on the block, someone came in and asked about that dusty old sofa/wireless division sitting in the corner. And a motivated vendor has to ask themselves: if the price is right, why not?
Assuming that the WSJ story is correct – and both the buyers and the divisions named are not improbable – then Nortel is about to sell its wireless CDMA and enterprise voice PBX businesses, which represent more than half of NT’s current revenues. Most of Nortel’s service business is tied to product sales, and the remaining non-tied service business would probably also be sold.
I think it unlikely, but all divisions of Nortel might be sold, and the proceeds distributed to the various stakeholders. Some value might be left for the common shareholders, but in today’s market that seems unlikely. According to the story there is good interest for the Nortel assets – but hardly a robust bidding war!
In my opinion, it is more likely that the Metro Ethernet Division (which includes all of Nortel’s optical technology) and the Carrier Voice division (including Voice over Internet Protocol or VOIP products) would be kept as the nucleus of a new company. Where NT once had revenues of US$30B the new entity would have about $2B of sales.
But before we get too depressed, there are some bright spots. Nortel actually has some pretty good market share and technology in those two businesses. In fact, with the right management, the right balance sheet and a bit of an economic recovery/rebound in telecom spending the pared-down company would likely be profitable and growing.
It would still be among the four or five biggest tech companies in Canada. In fact, the optical and VOIP businesses do most of their work here, so the NeoNortel (Nortel Mark II…the Son of Nortel?) might actually be even more “Canadian” than the company was prior to bankruptcy.
Question: how do you carve an elephant? Answer: start with a big block of marble, and remove everything that doesn’t look like an elephant.
As the carve-up of the company proceeds, I guess Nortel’s investors, debtholders and employees are hoping that we don’t end up with yet another white elephant.
If it is true, then how can they complete this process by May. I don't think so. These attempts are only a valuation of assets.
stinkyfoot
Considering Wireless, our carrier customers are very concerned about the Nortel situation and don't want to replace their installed base which would be too costly. Then the customer is the real value to be bought in this business ! Hence, rather than “chopped” we could see this bought by the other big players by region and technology. My guess is NSN for Americas and CDMA, Huawei for GSM and EMEA, ALU for GSM and Americas, no clear idea for ASIA/China. Of course, to reach this kind of deal, it must be deadly complex but I bet E&Y is pushing hard in this direction to serve our greedy creditors.
NTblinker
If it is true, then how can they complete this process by May. I don't think so. These attempts are only a valuation of assets.
Guest Post: The New Nortel Post-Restructuring
Here’s a guest post by Duncan Stewart looking at what Nortel could be post-restructuring:
Even before Nortel filed for bankruptcy in January it had put one of its divisions for sale. Therefore yesterday’s Wall Street Journal story that Nortel may sell large parts of its business came as little surprise to most people who follow the fortunes of Canada’s once-largest tech company.
Most corporations going through a restructuring under bankruptcy protection sell some assets in order to raise cash, appease debtors, and become more focused. Most of the time though, the bits that eventually get sold aren’t necessarily what was expected when the selling process began.
My parents have had a lot of garage sales. I suspect they have made almost as much money over the years from selling things that theoretically weren’t for sale as from the items with price tags on them. So too with Nortel: although Metro Ethernet Networks was on the block, someone came in and asked about that dusty old sofa/wireless division sitting in the corner. And a motivated vendor has to ask themselves: if the price is right, why not?
Assuming that the WSJ story is correct – and both the buyers and the divisions named are not improbable – then Nortel is about to sell its wireless CDMA and enterprise voice PBX businesses, which represent more than half of NT’s current revenues. Most of Nortel’s service business is tied to product sales, and the remaining non-tied service business would probably also be sold.
Technorati Tags: nortel
I think it unlikely, but all divisions of Nortel might be sold, and the proceeds distributed to the various stakeholders. Some value might be left for the common shareholders, but in today’s market that seems unlikely. According to the story there is good interest for the Nortel assets – but hardly a robust bidding war!
In my opinion, it is more likely that the Metro Ethernet Division (which includes all of Nortel’s optical technology) and the Carrier Voice division (including Voice over Internet Protocol or VOIP products) would be kept as the nucleus of a new company. Where NT once had revenues of US$30B the new entity would have about $2B of sales.
But before we get too depressed, there are some bright spots. Nortel actually has some pretty good market share and technology in those two businesses. In fact, with the right management, the right balance sheet and a bit of an economic recovery/rebound in telecom spending the pared-down company would likely be profitable and growing.
It would still be among the four or five biggest tech companies in Canada. In fact, the optical and VOIP businesses do most of their work here, so the NeoNortel (Nortel Mark II…the Son of Nortel?) might actually be even more “Canadian” than the company was prior to bankruptcy.
Question: how do you carve an elephant? Answer: start with a big block of marble, and remove everything that doesn’t look like an elephant.
As the carve-up of the company proceeds, I guess Nortel’s investors, debtholders and employees are hoping that we don’t end up with yet another white elephant.