Nortel Networks could soon announce the sale of its big enterprise division as it moves closer to a decision to break itself apart completely instead of restructuring and emerging from bankruptcy.
Nortel, once one of the world's biggest makers of telecom equipment, said late last week it would sell its CDMA and LTE wireless businesses to Nokia Siemens Networks for $650 million. It was the first major divestiture since Nortel filed for creditor protection in January.
The enterprise unit, which makes networks and gear for large corporate clients, is seen as a next logical candidate, said Duncan Stewart, analyst at DSAM Consulting in Toronto.
After the wireless division, it is Nortel's biggest business unit. It had first-quarter revenue of $395 million, down 41 percent from a year earlier, Nortel reported last month.
I would expect the amount that enterprise fetches to probably not be wildly higher or wildly lower than the Nokia Siemens sale, Stewart said.
Nortel itself said on Friday it is making progress in selling its other businesses, but added it will assess other restructuring alternatives if sales don't materialize.
At one time analysts had seen the potential for a slimmed-down Nortel to emerge, centered around its metro ethernet business. The unit makes Internet infrastructure and includes its optical and carrier ethernet technology.
Carmi Levy, an independent technology analyst, said he now expects a fairly rapid-fire sequence of announcements as the rest of the Toronto-based company is broken up.
The possibility that a downsized Nortel might emerge still exists, Levi said, but sales of as many units as possible now appear to be the priority.
If ... there is no sale, then at least that is one potential bright light for the future for whatever remains of Nortel, he said, referring to the MEN unit. That's because demand for Internet capacity and bandwidth would likely rise when the global economy rebounds, he said.
Nortel tried to sell the MEN unit last year, before pulling the plan in early February when no bids materialized.
The company is also looking for a buyer for its majority stake in a South Korean joint venture with LG Electronics.
The joint venture -- established in late 2005 -- is profitable with a strong balance sheet and did not file for creditor protection as Nortel did in January, the company said in late May.
NORTEL HAS ALMOST NO LEVERAGE
Nortel, operating under bankruptcy protection, has limited ability to negotiate good prices for its assets, Stewart said. The pool of potential buyers is also relatively small and the company's financial condition is dire.
Nortel, as a company that's going through this process, has almost no leverage, he said.
One factor now working in Nortel's favor is the global economy appears to be more stable than three or four months ago, possibly making potential buyers more interested in striking a deal, he said.
That's no guarantee that other bits of Nortel will sell or that they will sell at good prices, but it certainly suggests that the climate is one in which deals are being done, Stewart said.
(Reporting by Wojtek Dabrowski; editing by Frank McGurty)