Nortel's Remnants: Up for Grabs

(page 2 of 2)

MatlinPatterson may have other goals in mind. Nokia Siemens has to bid at least $761 million to grab the Nortel assets from the private equity firm, and many analysts say Matlin may not be willing to up the ante further. "It may be in their interest that the price goes higher," says Akshay Sharma, a research director at consultant Gartner (IT), since the private equity firm is also a Nortel creditor, holding 10% of the equipment maker's debt.

MatlinPatterson, which helped restructure WorldCom, has hired a group of auction advisers headed by Nortel's former North American president, Dion Joannou. If it acquires the wireless assets, the firm may also bid for other Nortel units, such as its division that makes telecom equipment for corporate clients, analysts speculate.

"A Good Starting Point"

The amount of the winning wireless bid will serve as a signpost for the relative value of Nortel's other divisions. Also on the block are Nortel's "enterprise" corporate telecom equipment business, which Avaya Communications has bid on, and a unit that makes Metro Ethernet equipment used in broadband networks. Nokia Siemens could be a bidder for the broadband business. "We'd not be surprised if the same company bids for multiple businesses," Nortel CEO Mike Zafirovski told BusinessWeek.com.

Avaya has offered $475 million for the enterprise business. Avaya's bid is just "a good starting point," Zafirovski says. The equipment maker could see competition from Siemens Enterprise Communications, says Frost & Sullivan's Gruia. Whoever wins will likely get "a revenue stream that's going to be as steady as it can get in telecom," since corporations tend to stick with phone vendors for long periods of time, he says.

A couple of wild cards remain. Other bidders, including Alcatel-Lucent (ALU) and Ericsson (ERIC) may participate in the July 24 wireless auction, says Gartner's Sharma. Alcatel-Lucent wouldn't comment. Ericsson didn't return a request for comment.

RIM Not Out of the Running

BlackBerry maker Research In Motion (RIMM) could seek to delay the auction or legally challenge its results. On July 20, RIM announced that it wanted to participate in the wireless auction, but "has effectively been prevented from submitting an offer." That's because RIM wouldn't sign a nondisclosure agreement that other bidders agreed to, says one source familiar with the matter.

Research In Motion says the agreement contained "onerous restrictions," and a company spokeswoman said in an e-mailed statement that "RIM does not consider the process closed."

RIM may join with either MatlinPatterson or Nokia Siemens to help outbid the other party, analysts say. Nortel holds patents that could help BlackBerrys work better over wireless networks, and they could be worth up to $2.9 billion, according to Ehud Gelblum, a managing director at JPMorgan Chase (JPM).

The fight for Nortel's most attractive pieces is about to commence.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

Business Exchange

Track and share business topics across the Web.