Avaya, Nortel deal could create leader: analyst
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A merger between Avaya Inc.  and  Canada&#39;s Nortel Networks Corp.  could create a leading  vendor of Web-based phone systems, a Prudential analyst said on  Tuesday, as talk swirled over a possible buyout bid for the  U.S. telecommunications equipment maker.
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Avaya Inc.  on Monday said it  agreed to be acquired by private equity firms TPG Capital and  Silver Lake for $8.2 billion, the latest in a string of mergers  in the telecommunications-equipment industry.
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Nortel Networks on Monday declined to comment on a news report that the company is negotiating with Motorola to combine wireless infrastructure units.&quot;Nortel doesn&#39;t comment on rumors and speculation,&quot; a Nortel spokesman said.The two companies are talking as a way to cut costs in a network equipment market that is consolidating and facing stiff competition, The Wall Street Journal reported Monday.The deal with Nortel would be separate from Motorola&#39;s announcement last month that it was&#160;considering spinning off its mobile handset business, the Journal reported. Motorola on Jan. 31 announced it was looking at separating the lagging handset division from the rest of its business.A Motorola spokeswoman wasn&#39;t immediately available for comment Monday.A combined wireless infrastructure unit would have sales around $10 billion, the Journal reported. Talks between Motorola and Nortel have been going on for about a month, the news report said, and under one scenario, Nortel would own a majority of the joint venture.Both companies have faced challenges recently. Motorola last month reported a loss of $49 million for 2007, due largely to declining handset sales.But fourth-quarter 2007 sales were up in the Home and Networks Mobility group, which makes set-top boxes and wireless infrastructure. The group saw sales rise 11 percent to $2.7 billion from the fourth quarter of 2006.Last year, the U.S. Securities and Exchange Commission charged seven former Nortel executives with participating in a 2003 accounting fraud by manipulating reserves to manage Nortel&#39;s earnings.Last February, Nortel announced it would lay off 2,900 employees and move another 1,000 jobs to low-cost locations throughout 2007 and 2008.
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Telecommunications equipment maker Avaya Inc.  is in talks with private equity and strategic bidders about selling all or part of the company, according to a report by The Wall Street Journal.
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(InfoWorld) - An acquisition of Avaya by Nortel might help the buyer expand its enterprise telephony business and pare down a crowded industry, but the deal could be tough for customers. Avaya is in talks with possible buyers and recently discussed a possible deal with Nortel, the Wall Street Journal reported Tuesday. Together, the companies would become the world's biggest vendor of telephony gear with as much as 35 percent of the market in its home base of North America, according to analyst Inder Singh of Prudential Equity Group. "Anywhere you look, they would become the dominant vendor," Singh said. Nortel, still emerging from years of accounting scandals and reorganizations, could use Avaya to boost its enterprise business, which delivers higher margins than its carrier network side, according to Singh. Because the companies have many similar products, the deal might also help Nortel cut costs by eliminating redundancies, he added. But for customers, the combination might not be such a good deal. Although Nortel is a bigger company, Avaya is the stronger of the two in IP telephony, which is where enterprise phone systems are going. Integration with Nortel and its unified communications partner, Microsoft, would cause a lot of confusion for customers, said Yankee Group analyst Zeus Kerravala. Avaya has made great technical strides recently, especially in software, he said. "Darwin should take over here and let the strongest survive," Kerravala said. One possible benefit to customers would be a one-stop shop with a strong telephony lineup as well as enterprise data networking gear, such as switches, which Avaya lacks, said Dell'Oro Group analyst Alan Weckel. Even if Nortel doesn't buy Avaya, analysts see acquisitions on the horizon in the industry. Enterprise telephony is a fragmented business: In 2006, in terms of numbers of lines installed, Nortel had 13.4 percent of the market, Avaya 11.6 percent and Cisco Systems Inc. 8.5 percent, according to Weckel. It takes a big vendor to keep up with the new features enterprises will seek as traditional phone systems give way to IP telephony and unified communications with its combination of voice, text, videoconferencing, and mobility, Weckel said. There also won't be room for as many companies in the next several years because even as IP telephony spending grows at 40 percent per year, revenue from traditional phone systems is falling as much as 15 percent, creating lackluster growth overall, Prudential's Singh said. Meanwhile, Cisco, which isn't saddled with a legacy equipment business, keeps growing. Though some observers have downplayed Nortel's unified communications partnership with Microsoft, which also has interoperability relationships with Cisco and other vendors, Singh believes that could be the factor that makes such a deal significant. Nortel and Microsoft are sharing software and doing joint development through a deal announced last year. "It would be industry-game-changing if you had these three companies lined up on one side with Cisco on the other side," Singh said.
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Network equipment manufacturer Avaya Inc. late Monday agreed to a $8.2 billion cash buyout by private equity firms TPG Capital LLP and Silver Lake Partners, the companies announced.
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(InfoWorld) - Nortel Networks reached a definitive agreement to sell its UMTS (Universal Mobile Telecommunications System) business to Alcatel-Lucent on Monday, locking down a nonbinding agreement announced in September. The Brampton, Ontario, company is selling the 3G (third-generation) infrastructure business so it can focus on developing faster 4G mobile systems and supporting customers with earlier CDMA (Code Division Multiple Access) and GSM (Global System for Mobile Communications) technologies. "We didn't have the scale or momentum to be where we wanted to be and to be able to lead in this space," said Richard Lowe, president of Nortel's Mobility and Converged Core Networks unit. The deal is part of an overall restructuring kicked off by President and Chief Executive Officer Mike Zafirovski after he took over Nortel last year. The company is trying to cut costs to become more competitive and turn around years of poor financial performance. When Nortel signed a memorandum of understanding to sell the UMTS business earlier this year, Alcatel was in the process of closing its merger with Lucent Technologies Inc. Those companies closed their deal and became Alcatel-Lucent last Thursday. What Nortel now has is a binding agreement to sell the UMTS business, which it hopes to close by the end of the month. Alcatel-Lucent will pay US$320 million for the business, minus certain deductions and transaction-related costs. The timing of the agreement just days after the Alcatel-Lucent deal closed was a coincidence, said Alcatel-Lucent spokeswoman RÃ©gine Coqueran. About 1,700 employees from Nortel's UMTS unit will move to Alcatel-Lucent, the companies said. That includes substantially all the research and development team and a portion of other employees in other roles such as sales and support, Lowe said. Nortel will now focus its research on what it calls 4G technologies, including WiMax, EV-DO (Evolution-Data Optimized) Revision C, and the LTE (Long-Term Evolution) generations of UMTS, according to Lowe. All these eventually will deliver multiple megabits per second of bandwidth to mobile devices, he said. Â
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With the Apple iPhone trademark battle now fading from memory, Cisco has forged ahead to its next mission: new business collaboration tools to compete with Avaya and Nortel.
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Nortel Networks Corp. warned Thursday that its full-year growth is expected to trail the industry, rather than lead it as the company had predicted as recently as a month ago.
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The ground rules of the tests of Cisco and Avaya systems.
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By Tony Glover - Technology Editor  NORTH American networking giant Nortel is looking to Russia for growth and is currently installing technology designed to give Moscow a better communications infrastructure than London before the end of 2006.
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Avaya Inc.  said on Monday it  agreed to be acquired by private equity firms TPG Capital and  Silver Lake for $8.2 billion, the latest in a string of deals  in the telecommunications-equipment industry.
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The wireless-infrastructure leader is connected to a profitable future.
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Rural mobile operator would likely carry a high price, which has two analysts split over whether Verizon Wireless will be the buyer.
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Private-equity firms TPG Capital LLP and Silver Lake Partners are in a leading position to buy telecommunications equipment company Avaya Inc.  for about $17 per share, the Wall Street Journal reported in its online edition on Monday.
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Nortel Networks Corp. NT.TO NT.N,  one of the world's largest telecom equipment makers, said on  Thursday it has made progress on plans to establish a wireless  joint venture with China Putian Corp.
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(InfoWorld) - Nortel Networks is spending 10 times as much on mobile wireless WiMax technology research today as it did a year ago, part of an initiative by Nortel chief technology officer John Roese in his first year at the post. Nortel's research investment in mobile WiMax, also known as 802.16e, is now $100 million, up from $10 million a year ago, Roese said in a recent interview as he celebrated his first anniversary. He assumed the CTO position in June 2006. As CTO, Roese oversees the $1.7 billion R&D budget for the networking equipment maker. That amount is about 17 percent of Nortel's revenues, slightly down from 19 percent a year ago, although the division still employs about 12,000 professionals, he said. The biggest shift at Nortel R&D is a stronger emphasis on WiMax and other emerging technologies, which was accomplished by lowering Nortel's R&D in what Roese called "late-lifecycle products," such as GSM technology, that still need research but are generally well defined in the market, he said. A year ago, half the R&D budget went for late-lifecycle products; now that figure has been reduced to 20 percent of the R&D budget. "Fifty percent on late-lifecycle products was inefficient," Roese said. Roese said it is important in R&D to have top developers working on the next wave of technology, not on declining segments. In all, about 20 percent of R&D is now devoted to emerging technologies such as mobile WiMax, while 60 percent is devoted to products in the middle of their lifecycle. Nortel also sold its UMTS (Universal Mobile Telecommunications System) unit to Alcatel-Lucent, which will help R&D focus on other areas, Roese said. The unit was not profitable, he said. Roese believes unified communications products, including mobile WiMax, will bring "huge productivity" to network providers and large businesses alike. Fixed WiMax, or 802.16d, is already being shipped to carriers to provide backhaul communications for cellular networks but has been implemented in some parts of the world to provide broadband access instead of using copper cable. Mobile WiMax will be a high-performance wireless data network for laptops and consumer devices, Roese said, and will eventually be used for voice service as a competitor to cellular voice. "WiMax is just emerging," he said. "It can be a reusable network for mobile data, DSL replacement, video distribution, and real 4G wireless. It will be built once and used for many purposes." Some cities and towns building municipal Wi-Fi networks have been interested in whether WiMax, fixed or mobile, might be the next-generation technology that threatens Wi-Fi, but Roese said Wi-Fi and WiMax will likely be complementary. Wi-Fi runs in an unlicensed spectrum, while WiMax will run in a licensed spectrum, he noted. "You'll want endpoints from unlicensed and licensed, so you want Wi-Fi and WiMax to both come together. You may be uplinking Wi-Fi endpoints via WiMax." The WiMax Forum expects WiMax-based systems to deliver up to 40Mbps of data per channel over as much as six miles.