Feature Article

June 19, 2009

Nortel Sells CDMA Unit to Nokia Siemens Networks

This enduring final chapter in the Nortel saga began back in January, when what was once the world’s largest telecom equipment vendor in North America fell victim to a struggling economy and went into bankruptcy. Since then, while Nortel has continued to develop its enterprise solutions, it quickly sold off parts of its application delivery assets to Radware in February — likely an effort to finance its existing debt and to continue development within its other divisions.
The rumors continued to swirl, with several Nortel competitors reportedly looking to strike deals for various parts of the companies enterprise and carrier divisions, including Nokia Siemens Networks, Avaya, Siemens, Genband, and others.
Of potential suitors, NSN was the most active, and rightly so, as acquiring large portions of Nortel’s carrier networks portfolio would give the world’s second largest communications infrastructure vendor instant access to the U.S. market, something it would otherwise struggle with. 
Today, NSN reached a deal to buy Nortel’s valuable CDMA portfolio along with a wireless research group, according to a Wall Street Journal report, for $650 million. The deal, brings clarity to reports the NSN made offers to Nortel back in early April, though details of the deal were, at the time, largely speculative. 
The deal would give NSN the access to the U.S. market is has been seeking, including potential business with Verizon Wireless and Sprint, both of which run CDMA networks. Perhaps more importantly, with a foot in the door, NSN will also have positioned itself as a contender for LTE contracts across the globe, as more and more wireless carriers look to build for the future, with LTE seemingly the pathway of choice, over competing WiMAX technology (a business which Nortel exited at the end of January). The 400-person research unit included in the deal specializes in LTE development.
In fact, the WSJ report notes that sources close to Verizon have indicated that Verizon Wireless, which has already selected Alcatel-Lucent and Starent Networks for its LTE buildout, might be open to adding a third vendor — if that vendor were to acquire Nortel’s CDMA unit. 
It was expected, back in January, that Nortel would look to sell off its assets quickly, not only to pay off its debts, but also to ensure the continued success of its product lines, which were likely to struggle as customer confidence in support began to erode. This may be the beginning of a fire sale that has been anticipated since the beginning of the year, though the delay will cost Nortel millions — NSN placed an $850 bid back in March, which Nortel rejected.

Erik Linask is Group Managing Editor of MobilityTechzone, which brings news and compelling feature articles, podcasts, and videos to nearly 3,000,000 visitors each month. To see more of his articles, please visit his columnist page.

Edited by Erik Linask

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