NSN nabs Nortel CDMA, LTE businesses for $650M

Nortel Networks said today it has entered into an agreement to sell its primary wireless business to Nokia Siemens Networks (NYSE:NOK, NYSE:SI) for $650 million in the first of what will likely be multiple transactions that will ultimately break the Canadian vendor apart. If the deal is approved by the courts, NSN—which currently has no CDMA product line whatsoever—will emerge as the world’s second largest CDMA vendor and with a strengthened long-term evolution (LTE) portfolio.

Since filing for Chapter 11 bankruptcy protection in January, Nortel has maintained it would try restructure in an effort to emerge as a stronger company. But as the months dragged on, rumors of Nortel’s impending break-up grew, and in May Nortel confirmed that it was in discussions with outside vendors to sell some of its divisions. With the sale of its CDMA and LTE businesses, Nortel’s demise a separate entity now seems assured. The company is applying to be delisted from the Toronto stock exchange, and CEO Mike Zafirovksi said today selling Nortel’s parts is now the best course for the company.
“Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority,” Zafirovski said in a statement. “We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible. This will ensure Nortel's strong assets--technologies, customer relationships, and employees--continue to play an important role in driving the future of communications. The value of Nortel's wireless business is recognized throughout the industry. The agreement we are announcing today is solid proof of that value and represents the best path forward for our other businesses."

As part of the deal, NSN has agreed to allow 2500 employees from the Nortel wireless divisions to stay on staff, which Nortel said represents a significant portion of those employed in those groups.

"We also believe this will help provide clarity for our customers and employees. Customers have demonstrated consistent support for our products and services, and we want to ensure they continue to benefit from Nortel's technology and know-how,” Zafirovski said in the statement. “In addition, Nortel's employees are doing a tremendous job under challenging conditions, stabilizing our business and delivering outstanding service to our customers. It is important to provide our employees with a clear sense of direction around their future and potential opportunities with the new companies."

NSN’s acquisition of the wireless groups is not assured. It has entered into a ‘stalking horse’ agreement with Nortel, which will award NSN the assets if no other bidders emerge. Nortel will submit NSN’s offer to bankruptcy courts in the US and Canada along with a motion to initiate an auction for the assets. If no other bidders emerge or if NSN counters any bids submitted, it will take control over the world’s second largest CDMA equipment business and one of the industry’s most coveted LTE product lines.

"Seeking a strong and stable buyer is the best path forward for our CDMA business and LTE Access assets,” Nortel Carrier Networks President Richard Lowe said in a statement. “If successfully completed, this transaction would give many of our CDMA customers a clear roadmap for the future evolution of their networks and the opportunity to extend their relationship with a long-term partner. Further, we expect that a significant portion of the employees associated with the assets being sold would be able to continue their innovative work.

"Nortel has a long track record of wireless innovation which has helped us secure a strong and loyal customer base. Throughout this sale process, our customers will continue to receive the highest quality support for their current networks. If successfully concluded, the buyer would gain access to leading edge technology, know-how, and embedded resources to support this significant customer base."