Nortel to sell Shasta switch line

Nortel Networks Corp., which has sold off its major business assets, announced Friday it is negotiating to sell the unit that makes high-end switches, including the Shasta product line.

Toronto-based Nortel has been operating under bankruptcy protection since January, 2009, after losing money nearly every year since 1998.

The firm said it has entered a “stalking horse” agreement to sell its multi-service switches for US$39 million to PSP Holding LLC. Nortel described the prospective buyer as “a special purpose entity to be fully funded at closing by Marlin Equity Partners and Samnite Technologies Inc., a communications technology company based in Ottawa.”

The MSS sale announced Friday includes the Shasta and Data Packet Network product groups.
Neither Nortel nor El Segundo, Calif.-based Marlin responded immediately to a request for comment.
The CEO of Ottawa-based Samnite, Patrick Di Pietro, said Friday he could not comment on the deal. Di Pietro is a former vice-president with Nortel and until recently was managing general partner at VenGrowth Capital Partners Inc.
The term “stalking horse” is used to describe what is essentially an opening bid in an auction for assets. This means a different firm could offer more money than PSP.

Nortel sold several other assets using similar arrangements. For example, in June, 2009, Nokia Siemens Networks made a stalking horse bid for Nortel’s code division multiple access (CDMA) unit, plus a non-exclusive licence to use Nortel’s Long Term Evolution patents. NSN was outbid by Stockholm-based LM Ericsson. At the time, several Liberal politicians and newspapers erroneously reported that Ericsson would actually acquire the Nortel LTE patents, close the former Nortel plants and fire the Canadian workers. In reality, Ericsson’s goal was to sell CDMA equipment and services to North American carriers. Ericsson  hired about 900 Canadian Nortel workers and kept its Ottawa-based research facility.

Nortel still owns its LTE and other patents and has yet to decide whether the company will remain operating as a patent licensing firm.

Nortel also sold certain enterprise networking assets, including its Contact Center and BayStack product lines, to Avaya Inc. of Basking Ridge, N.J.
Late last year Nortel sold the carrier Ethernet and optical networking assets to Ciena Corp., based near Washington, D.C. for US$773.8 million. With the Nortel assets, Ciena made Nortel Optical Multiservice Edge the flagship product set of its packet optical transport group.

Avaya is using Nortel’s Agile Communications Environment and Contact Center products for its voice and data integration products, aimed mainly at companies involving call centres.

In 2000, Nortel lost nearly US$3.5 billion (after losing money the previous two years) but the investor community barely noticed because revenue was US$28 billion. But revenues dropped to US$10.4 million in 2008, the year before Nortel filed for bankruptcy protection.

In 2001, Nortel employed 94,000 worldwide. Last February, it employed 534. Founded in 1895 as Bell Canada Enterprises Inc.’s manufacturing unit, it was known as Northern Electric, then Northern Telecom and finally Nortel Networks.



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