Carrier VoIP Officially on the Block

The latest Canadian Monitor's Report is now available and is focused on the CVAS Stalking Horse agreement with Genband. Negotiations were held with 7 different firms prior to the announcement of the Genband Stalking Horse agreement.

The proposed Auction Date is Feb 24, 2010, but this still requires court approvals.

The report also states that there are 2,185 CVAS employees and that Genband will offer jobs to at least 1,638 of these employees. There was also some wording around Contract Assignment with NN Turkey but it's not very clear if this includes Nortel Netas.

Perhaps NN Turkey is Nortel Netas. Can any of the readers here confirm this?

yes NN Turkey is Nortel Netas

Off subject a bit but I have to mention that Nortel(US) bonds are really up these days. Now trading at 70 cents on the dollar. Last April, same bonds were trading around 25 cents. Some investors knows things that we don't !

Genband's CEO has written an open letter to current CVAS employees explaining why he thinks acquiring CVAS makes sense for Genband and providing a rough outline as to where he sees a combined workforce heading (basically expanding Genband's interoperability footprint, especially with Nortel TDM equipment, though their market focus will still be on the full spectrum of available softswitches supporting their gateways).

http://www.genband.com/getdoc/a4ed2f64-5b2b-4c3...

I'm not sure there is much reassurance in there for Nortel workers - Mr. Vogt says Genband wants the business CVAS represents, a business he claims to know very well enough already with Genband's existing employees to provide a smooth transition for Nortel's CVoIP customers after Genband acquires CVAS, but he needs to get to know the CVAS people before making up his mind about whether to employ them. There is a line in the middle about "melding expertise" which could imply retaining experienced rank & file workers - let's hope so...

But the auction date hasn't even been announced yet, so we're far from knowing who the eventual winner will be, and if that turns out to be Genband, let's hope for everyone's sake that Mr. Vogt & his team find that they need the people as well as the products to capitalize on their CVAS purchase...

XPM_guy,

I think the salespeople at Nortel CVAS have the most to worry about. Genband has an extensive network of distributors and global resellers with each one offering a salesforce of their own. Take for instance global reseller Wipro from India. Not only do they have a salesforce but have a spot titled President - Global Sales and Operations that was filled in July by none other than former CALA president Martha Bejar.

So, maybe a sales job offer won't come from Genband but one could come from Martha at Wipro....:^))

Secondly, those that do get job offers from Genband will likely be looking at a paycut.

Lastly, not sure how the people at director-level will fare since they will cost Genband the most to keep even if they agree to a paycut.

All in all, Nortel CVAS may be better off as a whole with a NSN or E/// than a Genband or Sonus particularly the folks in CALA and EMEA.

This blog is very quiet these days. I guest no one as the guts or enough info to commit itself ?
Genband, Sonus maybe NSN or some long shots like NEC could get in the race ?
Could a $800 millions and fast growing business go for a little $300 millions ?
Come on pseudo experts, time to show up !

NSN and Ericsson are in the race for sure.

I'll believe that when I see it. I hope they are, becuase this bid is paltry... arguably embarrassing. Nortel & E&Y and all the lawyers have dragged this sorry mess out for such a long period. Anyone knows the prices continued to fall as they delayed and ran out of cash. But hey, they're earning millions in fees and charges as it drags along, and that's what their own businesses are all about. Maybe they held a hope of keeping something going as Nortel, but that thought died from the low prices the other divisions got.

But seriously, why would NSN or E/// be interested? (lets ignore NSN's half-hearted attempts at other bits to date, pretend they're really keen THIS time)
Would they get cheaper switching gear than they do today? R&D that suits them better than what they already have? I doubt that myself.
Only thing I can think of, they might think it's an opportunity to grow into a new market. But like I said, I'll believe it when I see it...

Any interested company is looking for the potential business that CVAS represents. CVAS is #1 globally in CVoIP sales and deployment, with a 61% share of the North American market in which most European companies are small players. According to independent analysts (not just Nortel execs), the softswitch solutions offered by CVAS are superior to the competition when replacing Class 4 & 5 TDM offices. This is true no matter which brand of TDM equipment is being displaced, but when that equipment is DMS (Nortel TDM), then the CVAS solution is definitely the easiest, smoothest upgrade path.

With thousands of aging DMS offices still handling vast amounts of the world's voice traffic each day, that represents a gold mine of potential sales in the next few years. Plus CVAS is virtually a turn-key business, with well established products and sales channels as well as active R&D, meaning that it makes good sense for companies both large (stand-alone division) and small (new direction to grow in) to consider acquiring it, not to mention the prospect of a vulture-capital firm taking over.

So there are plenty of reasons for companies like NSN or E///, or Genband or Sonus, to be interested in CVAS. The final bid will almost certainly be much higher than the opening bid, but they waited so long (and lost so much credibility along the way) before announcing a stalking horse bid that the amount reflects Genband's hopes that the delay has reduced the price. And if things had dragged out much further, they probably would have been right - but with a strong 2009 performance behind and a ready-made market waiting in 2010 for a CVAS that has a clear path to a stable future, I would expect the bidding to be serious and for there to be interested parties that we know nothing about yet...

We'll see!

"when replacing Class 4 & 5 TDM offices" - I'm getting rusty already, whats the hardware nvolved ATCA, CS 2000...

Hope they get a good price because logically why would they sell it especially if it is profitable and is a good prospect for future growth.
As a creditor, I would rather keep the assets and get a good return annually from it rather then selling my world number # 1 market share business for peanuts to a much smaller player like Genband. Unfortunately no one has ask my opinion on this sale even though I am the first interested party as an ex-employee and now creditor !

Agree with all you say XPM_guy... it was DMS that made Nortel, it's a huge market that they never seemed to exploit for renewals, to my mind. All I heard when I was there, were starry eyed Enterprise-penny&loss chasers saying Carrier wireline (and every acronym it's been called since) was dead.

Anyway I hope you're right...

Yes, every Nortel "leader" since Roth has been doing their level best to ignore Wireline & CVoIP - it has become conventional wisdom in Nortel's boardroom that the Carrier business is something they did not want (even though it has been the backbone of the entire company since at least the 1970's) and that the future of Nortel was selling Enterprise gear to a much larger set of customers, thus sparing the execs from having to kowtow to their counterparts at Vz, AT&T, etc. What a waste...

But the Carrier business has trundled on quite well, thank you, which is why CVAS is the only Nortel division that is or has ever been #1 and why it is the only division turning a profit and growing share in a shrinking market during the largest economic downturn since the Great Depression.

But Genband understands the value CVAS represents - and so do some other competitors I imagine. With any luck CVAS will go for a fair price to a company that can afford to retain as close to 100% of the rank & file as possible - sure the senior management might benefit from a shake-out, but it is those experienced, dedicated front-line engineers and salespeople who are the real asset up for sale here. Without that existing skeleton crew, winnowed after a decade of relentless culling, the business they have built despite Nortel's leaders has only a shadow of its potential...

For those who believed the IRS had a legitimate claim($3 billions) on Nortel. Here's what the jackals finally settled for :

''Nortel also revealed on Wednesday that it had reached a settlement with the Internal Revenue Service, which earlier in the year had submitted a claim for $3 billion against Nortel's assets. The IRS will drop all its claims against Nortel's U.S. subsidiary for the tax years 1998 through 2008, in exchange for a payment of $37.5 million.''

Ottawa Citizen Dec 24

Bad stock vs Good stock
NT vs AAPL
Bad CEO vs Good CEO
Mike Zero vs Steve Jobs
Mike Z claims additional $12 mill after the company BK
Steve asked for $1 this year after the company recorded highest earnings and the stock makes all time highest levels
...
AP
Apple CEO Steve Jobs takes $1 salary in 2009
Wednesday December 23, 7:08 pm ET
By Jessica Mintz, AP Technology Writer
Apple pays CEO Steve Jobs $1 for 2009, but value of his stake in the company tops $1 billion

Might as well get over it.
Zero don't work for Nortel anymore.
Nortel will cease to exist very soon.
It's all water under the bridge.
Look forward.

I know exactly what he did. He never "worked for Nortel" but he is still milking the dead company as we speak.

I really, really want to see a class-action suit tracking down Z man for his damage made to all the stake holders, share holders, employees.

Wow has CV-ass really fallen from grace.

lol - the description of my Nortel Cirriculum Vitae, exactly

Genband is also talking about a cost of ownership above 400 millions. Would this mean they would take some debt, pension liabilities ? Someone has an idea about what it means ?

http://www.advfn.com/news_GENBAND-Signs-Agreeme...

According to this interview with Mehmet Balos, Genband's Chief Marketing Officer, the $282 million cost could be revised upwards by up to $100 million once a review of CVAS assets is completed. Add to that the cost of paying all the lawyers and consultants as well as contracting Nortel Business Services to manage things like IT over the transition (which could last up to a year) and you get a total cost to Genband that might well exceed $400 million - though only the purchase price part of that goes into the pot to be divided up by Nortel creditors...

http://telephonyonline.com/global/news/genband-...

Thanks for the reply. Still look strange though that there could be a price spike up to 100 millions once review of assets.
First : all this time and still they cannot figure it out
Second : you are asking potential buyers to place a bid with 33% unknown ($100 millions vs $282millions). Looks fishy to me !

But of course NBS will have to charge Genband or some other "winner" enough to continue making bonus payments. You wouldn't want the remaining senior leadership to jump ship and go someplace that really needs their skill set, right?

Everything going through Nortel's hands becomes complicated and costly.

'Business made complex .This was the way. This was Nortel'

The all mighty CVAS up for 280 mill ... wow .... maybe Tiger can buy us out?

Seriously who is Genband. We already have the "leadership" team talking this up , but I cant see the big Telcos investing in GenWho. Start preparing your resumes for a future with another company

Should have been preparing your resumes 2 years ago. The low price is indicative of the division being a part of a company that has been bankrupt for a year. The longer it takes to get to the other side of an auction, the cheaper the price will become

I am surprised the starting bid is that l low.
I guess CVAS was overtrumped and does not have the potential wireless, enterprise and MEN have. CVAS was the only LOB that was profitable last quarter but that could have been an anomalous bump or something rigged to put lipstick on the pig.
It was the only profitable LOB, relatively speaking QoQ and comparing to itself year over year but it also generated the least for revenue.
One would think 280 is just the starting bid.
The final price tag could double which would make it close to my prediction of 625.

I think $282 mill isnt surprise. Nortel has just 25% CVAS bussiness of all world market. this price is just for Canadian vendor which has 30% CVAS of Nortel. The biggest percent for CVAS is belong to Turkish vendor "Nortel Netas" ,its contrubution 70%. To my surprise , I cant see any information about Nortel Netas here. CVAS = Netas . How can they sell CVAS buss without Netas.. İt is out of my logic..

Actually that low opening bid is a bit of a surprise - Nortel CVAS has 61% of the North American softswitch market, growing quarter over quarter even during bankruptcy, and was just named the top vendor in Asia as well. So I suspect that your 25% figure for global market share is incorrect, as is your estimate that 70% of CVAS's 2,500 workforce is based in Istanbul (actually as I understand it that 2,500 figure does not include any Netas employees, just those who work directly for Nortel - but I may be wrong).

There is much more to CVAS than just Netas. While Istanbul has been used as a low-cost center for offshoring many rank & file jobs, the intellectual property and program management functions have remained in Canada and the U.S. along with the bulk of the technical expertise in the form of the remaining old-school technical experts, while the Nortel CVAS sales team is global.

After its sale CVAS will of course need to continue to contract Netas for design support services, at least in near term, but the eventual winning bidder for CVAS does not need to buy Netas to get that support. It may turn out that they end up doing so, for various reasons, but there is no mandate to purchase them (or for that matter the parts of Wipro, Infosys, and GDNT that also provide design support to CVAS) as part of the Nortel CVAS auction.

When Nortel declared bankruptcy, Nortel Netas did not - it chose to remain a viable stand-alone business, and will likely remain stand-alone once Nortel has been fully broken up. Since it is not part of the bankruptcy, it cannot be sold as part of the court-run auction process. If a separate deal is struck to acquire them, it will be outside the bankruptcy process...

Thanks for great information you gave. To the some extend I agree with you but I have a few question for you.
Do you think that Netas is just for desing support services ? The biggest R&D lab. for voip doesnt mean anything for CVAS ? I think the future of voip tech will be shaped by this R&D lab. And the last question is , who did Pentagon's multimedia communications network systems ? .. Thanks for your patiance and care..

Note: Resource for 25% =>http://www.nortelnetas.com.tr/basin_bulteleri/new_2009_12.html
it's turkish page , but you can see this info under voip title..

Yes, Mike Z's chosen R&D Site Strategy moved the design center for switching to Istanbul, though it was not fully implemented at the time that he gave up and declared bankruptcy and many of the switching experts who created the technology that was shifted to Netas remain employed by CVAS in other capacities.

So Nortel's current management has been moving towards using Netas as its primary R&D source for some time, though the depth of expertise is still generally found in those long term Nortel employees based in Canada and the U.S. who understand how all the Base code works. If we're going to tick off key installations like the Pentagon, why not list the Nortel systems running in the U.S. Senate and White House (both designed, built, and installed entirely by Nortel employees in the U.S. and Canada - as was the Base upon which the Pentagon system was built).

But all that is a moot point when we consider the fact that Nortel Netas is not part of the CVAS auction because, unlike Nortel, it is not bankrupt. Because it did not enter bankruptcy with Nortel, Nortel Netas cannot be part of the monitored business unit sales going on in Canada, the U.S., and the U.K.

So for all intents and purposes relating to the CVAS auction we're discussing here, Netas is not a part of CVAS (let alone its majority) and thus is not a direct concern. Either it will be bought on the side if the winning bidder has enough money left over or it will remain a stand-alone business that is 53.13% (sorry about my approximate figure earlier) owned by Nortel Business Services until NBS is finally liquidated in a year or two, and then who knows what will happen...

But regardless of who owns or doesn't own this much or that much of Netas going forward, whoever buys CVAS will almost certainly continue the integrated nature of the two businesses, at least for the near term (and honestly, who can predict any further than that in today's economy)...

So no need to worry! Your job with Netas is safer than any of ours within CVAS right now (i.e. we know that the winning bidder won't take all of us in 2010, but your company will remain the same regardless for at least another year or two).

We'll all just have to wait and see what happens in the auction to discover who the eventual winner turns out to be and where they want to base their R&D organization in the years to come. Only then does it makes sense to worry about who will end up owning Netas and how big a part it will play in CVAS going forward...

Great thanks for your detailed answer. I should say that I'm really amazed by your knowledge about Nortel Netas. And All you said for the bankruptcy process are absolutely right. But, I dont think that 1000 R&D engineers are just working for design support services. it looks little bit funny. Probably this service is just for your company. Merry Christmas...

I don't mean to give the impression that I have any special insider knowledge - I'm just another support engineer who has been around long enough to remember XPMs... So I'm just guessing, same as everyone else on this blog!

Also, with respect to Netas I've been using the term "design support" in its broadest sense - perhaps "design and support" would be more accurate...

I did not know that Netas has 1,000 engineers and designers working on Nortel CVAS projects and products - does that include management? Does Netas provide design and/or support services to any other company, or just Nortel CVAS? Will that change now that Avaya owns what used to be Nortel's Enterprise TDM and VoIP switching products? Or will all that be handled through NBS?

Just curious!

not 1000.when you extract the Avaya Enterprise,Government solutions and the management staff,there are 600-700 CVAS employees I guess.

I dont have any special insider knowledge,too. I am just an investor at Istanbul stock market. "design and support " sounds better :)) probably it is more accurate. Yes , Netas provide design and support services for other companies,too. For your last question I dont really have any idea.

i wish you the best...thanks for your supporting & informing comments. merry christmas eve...

Hi zuperman. Are you sure that Ulker is keen to purchase Nortel Netas ?

yes, i heard it from many sources. also Nokia Siemens, LG, Aselsan, Çalık and Ericsson are on the race. Hope it ends well for all of us.

Zuperman, you are really great. Finally Ulker declared its interest with buying Nortel Netas. I remember that you said Ulker could propose $730 m. I wonder whether this amount just for 53% ???

Ericsson is not in the race for Netas.

What about Avaya ??

not sure but I don't think so.They have already sign a 9-month contract with Netas as an outsource supplier.It seems that Netas will be acquired by the local companies.

But they are in the race for CVAS. I can guarantee you.

Yes,I think so.Ericsson might be the best option for CVAS employees,I hope the will acquire the CVAS biz.

Hi zuperman, Can you also predict,more or less, the completence date of due diligence for Nortel Netas?

Thanks zuperman. I've heard almost the same :))

Zuperman, you mean all these for Nortel Netas or CVAS?

An excellent post from someone who actually knows what he is talking about. Thanks for setting the record straight, XPM_guy.

NETAS is NOT NORTEL. It's a company Nortel owns 51% of but all buyers have shown 0 interest in maintaining that... It's basically a 3rd party and will officially become that once the deal on CVAS is struck. NETAS will provide design support and unfortuantely some product support most likely but will not be interfacing with customers directly.

This is the word fro the people that be. I'm just hoping that someone big (ER////cough cough) throws some dough into the pot and picks CVAS up at the end. And I hope for us employees sake they get it for a STEAL.

The cheaper the buyer gets the company for the more employees that they can afford to keep. Basic math....

The only good thing is once NETAS become officially a 3rd party we can hold them to SLAs and when they suck as bad as they do not at design etc...then we don't have to pay them :)

I hope these dumb exec's who put things like NETAS/KT/Sigma/COEs in place all rot in some hole and get wacked on "Day One" of the new company..

i find your lack of faith disturbing...

Let me correct some misinformation you gave. The company's name is Nortel Netas. Also Nortel owns 53,1% exactly not 51%. if you search in net , you can get much more precise information about Nortel Netas which has the biggest research and development lab for VOIP in the world. Besides , we know that there are some companies interesting with buying Nortel Netas. So ,word "0 intrest " also doesnt reflect reality ,too..

for example?

In fact the 51% stake in Nortel Netas is held by Nortel UK and the purchaser of Nortel in EMEA is decided by the administrators and not the courts in the US and Canada.

Normally though this is just a formality.

As I understand it, Nortel's 51% stake in Nortel Netas is not part of the CVAS auction...

As far as I see , you have profound knowledge about Nortel. NNIF's stake in Nortel Netas is 53,13% exactly. I just didnt understand from where you got 51% ?

Welp...glad you have time to research the net and worry about 51 or 53.13123214, I think everyone gets the point.

We will see what happens with the new buyer. I and most execs I have had meetings with see "Nortel" NETAS becoming a 3rd party design resource center for whomever ends up buying the real "Nortel Carrier" assets.

I think you are forgetting the folks in Canada and US have created most the products that are being worked on in your 'largest' VoIP R&D Lab over the past 30years.... Also, until past few years it didn't take 6months for a easy patch/fix like it does now...it took more like 6days....what has changed...

I'm done...this is not a NETAS / CoE / WIPRO discussion forum.....

Contritionem Praecedit Superbia et Ante Ruinam Exaltatur Spiritus.

Yes, those in CVAS that was cut and will be cut, and those in NBS, our only hope is a better economy and better job market next year. For a moment, let's forget about all this chaos and sadness that we had for the last 9 years, and let's enjoy a little peaceful winter break that we all deserve.

Well at least Mark can cease these silly posts about a "new" Nortel emerging now that the last major division is on the chopping block. My prediction is coming true: Nortel won't officially cease to exist until end of 2010 or 1st quarter of 2011. Here's the definition of a beating: being a "Nortel" employee in Nortel Business Services with the sole purpose of helping the CH 11 entity finish it's obligations so it can go Ch 7 and liquidate the chairs, buildings, PCs, etc. Here's prayers that the 2010 job market snaps back to give those NBS people a chance to get out ASAP.

We need to remember that even Z said that Nortel would not emerge from this process. For once he seems to have been telling the truth.

Non-legality of layoffs in the UK on channel 4 news last night:
http://www.youtube.com/watch?v=AQlEOZMbzRw

Why does this article say that Genband was not amongst the speculated buyers? We''ve been speculating on Genband being a CVAS buyer for months here!

how does corporate get away with it in so many countries?

Genband was considred to be the top bidder. With OEP backing Genband, you can rule out NSN.

Agree - speculation was always Sonus or Genband. NSN not much in the discussion until they lost GSM auction...

Does anyone know if Sonus Networks is in the mix anywhere in this process?

Nobody seems to consider E/// but these guys are pretty unpredictable. They will probably be very interested and will not be surprised if they swallow everything

they would place a bid only if NSN declares one :) they are completely focused on preventing NSN from entering NA market. I think NSN will place a bid because they are addicted to being defeated. :)

Depends on what your definition of "officially" is.... will this agony ever end?

I think $282 mill isnt surprise. Nortel has just 25% CVAS bussiness of all world market. this price is just for Canadian vendor which has 30% CVAS of Nortel. The biggest percent for CVAS is belong to Turkish vendor "Nortel Netas" ,its contrubution 70%. To my surprise , I cant see any information about Nortel Netas here. CVAS = Netas . How can they sell CVAS buss without Netas.. İt is out of my logic..

dd

CVAS...R&D ? All architects and experienced designer in CVAS somehow left Nortel..A2E,MCS,IMS guys headed to Avaya,Broadsoft,NSN etc...kiddies A2E/MCS in Nortel Netas Turkey dealing w/t the product know...The same for CS2K Core side...Few architects left allover Nortel...If the new buyer of CVAS do not recruit back experts left CVAS then there is no future for CVAS...