Nortel Inches Closer to Unit Sales

Posted by: Olga Kharif on May 11, 2009

On May 11, Nortel reported yet another quarter of disastrous results — results that could, potentially, further pressure prices of business units the company has up for sale. Revenues, at $1.73 billion, were down 37% year over year. The company lost $507 million in the quarter.

An analyst I’ve talked to on background believes the revenue decline could further reduce the value of Nortel’s four businesses, which are currently being shopped around to buyers as Nortel goes through bankruptcy restructuring. Nortel announced it’s finished separating the four businesses on May 11. “There’s a great deal of interest [in the businesses],” Nortel CEO Mike Zafirovski told me today. “We’ve not initiated any of these discussions, but there’s an enormous amount of interest in all of [the four units].” He told me that the potential acquirers are all old hands in the telecom equipment space. The Wall Street Journal had reported earlier that Nokia Siemens Networks, Avaya and LG are among potential bidders. The analyst I’ve talked to believes that there’s the least amount of interest in the company’s Metro Ethernet Networks unit, which had driven much of Nortel’s growth during the Internet boom.

There are several things Nortel has going for it, however. Although its sales have fallen off a cliff, once again, in January, following news of the bankruptcy filing, they’ve risen sequentially in every month since, Zafirovski says. Thanks to cost cuts, the company’s cash position remains stable, so there’s less of a hurry to do a fire sale of assets. More favorable stock market and lending environments could help Nortel snag a better price for its assets as well. Whether these will outweigh the overall continued revenue declines’ drag on prices remains to be seen.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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