Nortel acknowledges talks with outside vendors

Nortel Networks today revealed it is in negotiations over the possible sale of some of its business units, while it navigates Chapter 11 bankruptcy. The vendor has made no final decisions and did name the specific business units or interested buyers, but the company said it is still in the process of separate its core product divisions into standalone companies, so it can then decide the fate of each individually.

"Nortel has rich resources, leading-edge know-how and a deep talent base, and it is our responsibility to preserve this value," Nortel president and CEO Mike Zafirovski said in Nortel’s first-quarter earnings statement, released this morning. "These are the key considerations in our decision-making process, and work is well underway to evaluate the ultimate path forward for our businesses.

"Discussions are taking place with various external parties, however, decisions have not been taken and we continue to evaluate our restructuring alternatives.  To provide maximum flexibility we are also taking the appropriate steps to complete the move to standalone businesses."

Specifically Nortel aims to separate its Carrier Networks, Metro Ethernet Networks (MEN) and Enterprise Solutions groups, as well as its international joint venture with LG Electronics, into standalone divisions. To facilitate that new structure, Nortel is decentralizing carrier sales and global operations functions in the coming weeks so each business unit will have its own dedicated sales and operations. But Nortel is consolidating its shared-services organization under Nortel Business Services, in an effort to streamline financial, corporate and support functions across the distinct divisions.

"We have made the necessary structural decisions to give Nortel the ability to optimize value, and preserve innovation platforms and employment to the greatest extent possible," Zafirovski said in the statement. "Our businesses will have the opportunity to more effectively serve the discrete needs of their respective customers and market segments, while maintaining high customer service and network performance levels."

The possibility of a sale of one or most of Nortel business divisions still looms large, though Nortel has made no public comment on the growing number of news reports on interest from its competitors. Facing pressure from its creditors to divest key product groups or break itself up for sale, Nortel has hired Goldman Sachs to help find a buyer for its 50% stake in LG-Nortel, according to The Financial Times. While the vendor sold off much of its 3G portfolio to Alcatel-Lucent in 2006, Nortel has worked with LG via the venture on its 4G long-term evolution (LTE) product development. The Wall Street Journal has reported that Nokia Siemens Networks (NYSE:NOK, NYSE:SI) is directly bidding for major parts of Nortel Carrier Networks, including its 4G product line and research & development operations, while Avaya and Siemens (NYSE:SI) are bidding on Enterprise Solutions.