"Time is the enemy" for Nortel's restructuring plans
Published: 19 May, 2009
READ MORE: Nortel Networks
The latest twist in the Nortel saga is an ironic one - the Canadian company, which began its downward spiral with plans to sell off just its Metro Ethernet unit, may exit bankruptcy protection with just that division remaining.
Although the company spent its first few months of creditor protection insisting it would emerge intact, if slimmed-down, recently it has been widely expected to go for break-up (it is forced under bankruptcy law to choose the option that generates the best value for shareholders). However, having failed last year to sell off Metro Ethernet Networks (MEN) to Huawei or others, Nortel could now hang on to this unit and offload the rest. MEN includes internet infrastructure, optical and Carrier Ethernet technology, which will be important products to have in the coming shift of the carrier world towards all-IP and massive 'zettabyte' IP networks.
"It would be smaller, obviously, but it would be a viable company capable of competing in that space," Duncan Stewart, an analyst at DSAM Consulting in Toronto, told Telephony. MEN accounts for about 21% of Nortel's sales, at $360m in the first quarter of this year.
While MEN may be emerging as Nortel's shiniest asset, it will almost certainly sell off its other units, particularly the cellular networks division, with Nokia Siemens and Huawei said to be top of the bidders' list; and enterprise products, in which Cisco, Avaya and private equity groups are reported to be interested.
With revenue dropping 37% in the first quarter amid rising customer and investor nerves, Nortel does not have time on its side, despite several extensions of its deadline to exit bankruptcy protection. CEO Mike Zafirovski says sales are stabilizing, but said in a recent interview in Canada that "time is the enemy".
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