Deadline looms for Nortel enterprise sale

If you want to buy the enterprise assets of Nortel Networks Corp., you will have to submit your bid today.

Nortel has been operating under bankruptcy protection since January and is trying to sell off its business units.

As of Friday morning, the only company that has publicly announced a bid for the enterprise unit is Avaya Inc. of Basking Ridge, N.J., which delivered its US$475 million stalking horse bid in July. If anyone other than Avaya bids, then a U.S. bankruptcy court would hold an auction Sept. 11.

Another vendor rumoured to be interested is Munich-based Siemens Enterprise Communications Group, known as SEN Group, whose products include voice and data networking products from both Siemens AG and Enterasys Networks. On Thursday a Siemens spokesperson, Silvie Casanova, told Network World Canada the firm does not comment on speculation.

“SEN made it clear in May they want to make a play for the enterprise unit,” said Mark Tauschek, lead analyst for London, Ont.-based Info-Tech Research Group. “They sat quietly in the background as Avaya made a stalking horse bid.”

SEN also has the OpenStage phones and OpenScape products line, which has unified communications, messaging and other products.

If you’re a Nortel, Avaya or Siemens customer you should be concerned. You won’t really know which products will go until they’re gone. If I were a customer of Nortel’s I would probably be very cautious about making a decision right now.Zeus KerravalaSenior VP, The Yankee GroupText

SEN is 51 per cent owned by The Gores Group LLC, a Los Angeles-based private equity firm, which acquired its stake in Siemens Enterprise in 2008. Gores Group also owns switch and router maker Enterasys Networks, formerly known as Cabletron.

If SEN places a bid for Nortel enterprise, it is “not necessarily for the product capabilities,” Tauschek said. “They’re not looking so much for that capability and the product line,” he said, but more as a means of increasing its share in the North American market.

Another analyst agreed.

“Siemens has coveted the North American telephony network for years and never made much ground,” said Zeus Kerravala, senior vice-president at the Boston-based Yankee Group. “They could continue to do what they’ve been doing and still they would get the same result, they would never make much ground.”

Adding the Nortel enterprise product line “would give them a significant position in the North American market,” Kerravala said. He agreed there is considerable overlap between Nortel and the combined product line of Siemens and Enterasys.

“If you’re a Nortel, Avaya or Siemens customer you should be concerned,” Kerravala said. “You won’t really know which products will go until they’re gone. If I were a customer of Nortel’s I would probably be very cautious about making a decision right now.”

Avaya used to make switches under the Cajun brand name but warned a year ago it would stop supporting them.

If Avaya succeeds in acquiring Nortel’s enterprise assets it would be inherit Nortel’s Ethernet Routing switches.

“On the switching and routing side Avaya wants that stuff,” Tauschek said. “They want that intellectual property and that capability whereas Gores already has that with Enterasys.”

Avaya was spun off in 2000 as the enterprise unit of Lucent Technologies (formerly AT&T’s Bell Labs unit), which has since merged with French telecom equipment maker Alcatel. Avaya was taken private two years ago.

When Avaya placed its bid for the enterprise unit, it was well received by the Nortel Networks Users Association At the time, the association’s executive director, Victor Bohnert, said the bankruptcy protection hurt Nortel’s chances of selling new products.

Nortel inherited some of its enterprise products when it bought Bay Networks in 1998 for US$9 billion. Its enterprise lineup includes phones, PBXs, firewalls, Ethernet routing switches, virtual private networking, network access control, key systems, voice switches and media gateways.

Nortel is trying to sell most of its assets so it can pay bondholders and other creditors.

LM Ericsson of Stockholm has agreed to buy Nortel’s carrier wireless unit, though Liberal politicians have demanded a review, plus four-way talks among Industry Canada, Ericsson, Nortel and Research in Motion Inc.

For its part, Waterloo, Ont.-based RIM tried to buy Nortel’s LTE patents earlier this year and complained it was shut out of the bidding process.

RIM’s dispute with Nortel was the subject of a House of Commons committee hearing last month.


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