NSN, Sonus and Ericsson all touted for further Nortel units
Published: 17 August, 2009
READ MORE: M&A | Ericsson | Nortel Networks | Nokia Siemens Networks | VoIP | CDMA | LTE
Nortel's break-up process is gathering pace, and while RIM looks unlikely to disrupt the Ericsson purchase of the LTE and CDMA assets, other units are coming up for sale. The next auction will be for the enterprise business, and sales of the LG-Nortel stake, Metro Ethernet (MEN) and VoIP units are all expected to grind into action within weeks.
The enterprise unit has Avaya as the 'stalking horse' bidder (who sets the reserve price with an advance bid, but can still be outbid by any qualified contestant at auction, as NSN was by Ericsson). Huawei was once interested in the MEN business, before Nortel filed for bankruptcy protection, but the deal seemed to have foundered on political concerns, and the Chinese giant is no longer rumored to be a likely bidder. Instead, Juniper Networks and Nokia Siemens (possibly acting together, since they collaborate heavily in Ethernet markets), plus Cisco, are considered the most likely, though Ericsson has also been mooted.
The controlling (50% plus one share) stake in LG-Nortel, which has not filed for bankruptcy protection, could be highly attractive to any of the leading wireless vendors, as it is profitable and active in some key growth areas of technology.
And Canada's Financial Post reports that Nortel is close to a $800m stalking horse offer for its VoIP business, with Sonus considered the frontrunner by analyst Catharine Trebnick of Avian Securities. Samih Elhage, president of Nortel's Carrier VoIP and Applications Solutions unit, told The Post: "We are very close to getting a stalking horse bid, which will provide clarity on the situation." Other likely candidates include all the usual suspects - Alcatel-Lucent, NSN, Ericsson or even Huawei, all looking to boost their carrier IP offerings to span wired and wireless, and a multitude of business models.
Meanwhile, RIM's has been attempting to block the Ericsson purchase, and possibly strengthen its own chance of getting hold of Nortel's patents portfolio (which could still remain the heart of a rump Nortel rather than being sold). Success looks unlikely, as Canadian prime minister Stephen Harper says he will not block Ericsson's $1.13bn deal.
Even before taking over Nortel's CDMA and LTE assets, Ericsson is seeing its market share in equipment growing despite the aggressive challenge from Huawei. According to the latest figures from Dell'Oro Group, the Swedish leader doubled its lead during the second quarter. Its own market share remained stable year-on-year at 32%, but second placed NSN slipped back from 26% to 20% share, greatly extending Ericsson's lead.
Huawei's share leapt from 10% to 17% (in unit terms it may already be in number two spot, but its prices are lower); while Alcatel-Lucent came under further pressure in wireless, with its revenue share down from 14% to 12%.
Overall growth is slowing, and most vendors expect the market as a whole to decline by about 10% this year, before picking up slowly in 2010. But Huawei and ZTE have made major gains, nearly doubling their market share in the past year, according to Dell'Oro.
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