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Nortel Closer to Total Shut Down
The $650 million purchase of Nortel's CDMA operation should help Nokia as it seeks to ramp up its handset sales in North America.

By W. David Gardner / Information Week
June 22, 2009

The fire sale of Nortel Networks Corp.'s assets is accelerating with the purchase by Nokia Siemens Networks, of the Canadian firm's CDMA and LTE assets -- its crown jewels -- for a reported $650 million.
As the world's second largest supplier of CDMA infrastructure, Nortel supplies the 4G infrastructure products to three of the five top CDMA global operators including Verizon Wireless. With the CDMA unit earning an estimated $700 million a year, Nokia Siemens stands to earn its investment back in slightly more than a year.

Once a telecom infrastructure giant with a market valuation of $250 billion, Nortel is now barely worth $2 billion. In recent days, Nortel CEO Mike Zafirovski noted the market cap was $10 billion when he took over the top spot in 2005. Zafirovski left Motorola where he had been second-in-command.

"Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority," said Zafirovski in a statement. "We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible. (Nortel's) wireless business is recognized throughout the industry."

Zafirovski said the ravages of the worldwide economic slowdown had contributed heavily to the firm's problems. Before that, the telecom bubble had taken a toll on the company and an accounting scandal had helped blunt the firm's forward progress.

The telecom infrastructure industry has been racked with problems in recent years -- Motorola has sunk to the point where it put its once-coveted mobile phone operation is up for sale and Lucent Technologies had to sell out under pressure to Alcatel.

The purchase of Nortel's CDMA operation should help Nokia as it seeks to ramp up its handset sales in North America where it has lagged in market share. Nokia dominates handset sales globally, accounting for more than the next three suppliers combined. Its presence, however, is not as strong in smart phones and the CDMA unit -- along with some Nortel R & D -- could give it an advantage in some smart phone markets.

Additional pieces of Nortel that are for sale include its enterprise operation, a VoIP unit, and its optical Metro Internet business.