Exclusive: Siemens Gore to Bid for Nortel’s Enterprise Business

By Mark Evans | Published: September 3, 2009

With tomorrow’s deadline to submit bids for Nortel’s enterprise busines, All About Nortel has learned from reliable sources that Siemens Gore will be making a competing bid.

As it now stands, Avaya is the only bidder in the “stalking horse” process with a $475-million offer.

Siemens, however, believes it would be better fit because most of Nortel’s existing Canadian and U.S. dealer and customer channels would stay intact – compared with Avaya’s bid in which the dealer and customer channels would be morphed into Avaya’s channels.

For Nortel’s creditors, it appears that alternatives to Avaya’s offer would be a welcome development.

One of the major concerns is that if that Avaya’s bid is successful, Nortel would have to continue to support and finance the business until Avaya was able to anti-trust approval from the U.S. Department of Justice – a process that would take months.

In a court filing, MatlinPatterson, who owns $400-million Nortel debt, said a major issue with Avaya’s bid is a “hell or high water” clause that requires Avaya to do everything necessary to complete the transaction.

MP alleges, however, the deal “strips the debtors’ board of directors of the right to exercise their fiduciary duties to consider alternative transactions pending the closing the Avaya deal, so that the debtors are not left with 7 months of expenses and no purchaser if Avaya fails to close.”

Translation: MP believes the value of the enterprise business could shrink the longer that Avaya takes to complete it given the enterprise unit’s revenue is eroding.

Nortel’s enterprise business had about $2.7 billion of revenue last year but sales have dropped due to the slower economy and the uncertainly surrounding Nortel’s future while its in bankruptcy protection. In the second-quarter, sales dropped 28% to $465-million from the same period in 2008.

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  • zeroman

    Why would Avaya kill the Microsoft alliance. They benefit by keeping it unless they go to Google.

  • zeroman

    some products are complementary. but the only way to go is to buy the enire unit. 500 million is a huge price to pay. it will go up to 750 million.

  • zeroman

    wow cisco in routing takes away share and dominates a space Avaya (Lucent) and Nortel, whose edge was voice. They have quickly taken over Carrier.

    on the other side you have huawei selling C class cisco gear copying their products.

  • normanZ

    Who says that Avaya would kill the Microsoft deal. It's more like Microsoft doesn't want Avaya. Microsoft would kill the deal and stick with what they agreed to with HP a few months back.

  • gone2moro

    Which Ethernet Switch would Siemens Gore sell?… The Entarasys or Nortel… or both?… that ought to confuse the crap out of customers.

  • mrzfantom

    Microsoft and Cisco are locked in a battle for Office documents. Cisco’s WebX runs Google’s office docs; Microsoft has the Office suite as its cash cow. Email is currently the way we share docs and Microsoft’s Exchange absolutely dominates in this enterprise market. However Facebook, MySpace, SharePoint etc all indicate that a major shift is afoot in the enterprise. Email is old and outdated and horribly inefficient. CTOs are looking to migrate to real-time document collaboration. That provides Cisco with a discontinuity, an opportunity to enter the market with WebX. However, Microsoft is not asleep at the wheel, and rarely loses when confronted with such competition. Also looming are the recent Silver Lake purchases of Avaya-Skype, with Nortel planned shortly. That is 75% of the NA enterprise voice market. While not directly aimed at office documents, Silver Lake has acquired considerable strength in real-time collaboration and the next generation of enterprise mobile, software that decouples the wireless providers from voice, presence, email, IM, location services etc. It’s difficult to see how Microsoft would not want to join Silver Lake with OCS and its mobile CE operating system creating formidable competition for Cisco and possibly challenging Apple who frankly has out imagined all the laggards..but not Marc Andreessen.

  • vvvv

    MCS 5200 came first, the 5100 came later as a small derivative for the Enterprise space. Before MCS 5200, the product was called CS 3000 for the carrier market. But your point is valid. It's not easy to unwind CVAS and Enterprise.

  • vvvv

    In North America the Siemens Enterprise business is built on the old ROLM product, which competed strongly with the Nortel SL-1 as original digital PBXs of the 1970s.

  • smokeemout

    Great post.

    Better than many of the posts here are those that offer speculation, you pointed out the 'what's at stake to the players'.

    Usually we get what starts out looking like a (Northerly) wind; but usually ends up as just (hot) air.

  • smokeemout

    Great post.

    Better than many of the posts here are those that offer speculation, you pointed out the 'what's at stake to the players'.

    Usually we get what starts out looking like a (Northerly) wind; but usually ends up as just (hot) air.

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