NSN: Nortel CDMA purchase about customers, not growth

The purchase of LTE business, though, is a strategic move focusing on future growth, not an established market. Nortel has one of the industry’s most desirable 4G technology portfolios, but due to the uncertainty about its future under chapter 11 bankruptcy protection, potential customers may have kept the company at a distance. Nortel claims it was a close third in Verizon’s LTE selection process, and Beresford-Wylie sited Nortel’s advancement in LTE software, algorithms and multiple-input/multiple output (MIMO) technology as key reasons for pursuing the acquisition even though NSN has developed an LTE product line of its own.

Unlike the CDMA business, which is fully developed, Nortel’s LTE unit is still in the process of commercializing a product. NSN will primarily be buying its R&D assets and technology rather than established business units. Those differences are reflected in the 2500 staffing commitments NSN has made if it succeeds in its bids. Wireless R&D is focused primarily in Ottawa, where NSN plans to maintain the majority of the former Nortel presence in North America. Meanwhile, the more customer-facing CDMA product support and sales group is primarily based in Dallas, where NSN will also maintain operations. Beresford-Wylie said that though Nortel’s LTE efforts will be folded into NSN’s in Europe, the Canadian labs will have a considerable role to play in research.

“We really do believe that this is the best possible outcome for Canada,” Beresford-Wylie said. “We plan to keep Canada absolutely at the heart of wireless research.”

The deal is by no means final. Nortel has entered into a ‘stalking horse’ agreement with NSN, which essentially makes its $650-million offer the initial bid in what could be a highly competitive public auction overseen by the bankruptcy courts. Nortel’s CDMA business alone brought in $700 million last year, though the recession and Nortel’s bankruptcy may have caused revenues to slide. At NSN’s price, a buyer could recover its investment in a relatively short time as well as gain Nortel’s highly prized LTE assets. Beresford-Wylie, however, said NSN hopes to finalize the deal in the third quarter.

“We’re getting close,” he said. “We’re not quite over the finishing line, but we believe our offer is a fair one.”