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Reports: 'Disintegrating' Nortel nears sale of major business units

Mike Zafirovski

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James Bagnall, a journalist with the Ottawa Citizen who has covered Nortel for many years, says the telecommunications gear maker is “disintegrating.”

In a story headlined “The end-game is unfolding rapidly at Nortel,” Bagnall reported Thursday that one business unit could be sold at any time and others are on the auction block. Nortel filed for bankruptcy in January and has been laying off thousands of workers since last fall.

“Nortel insiders talk of a culture in which there is near complete focus on selling off the businesses -- from telephone-switching gear to wireless networks,” he said.

Under bankruptcy, Nortel had hoped to reorganize while still generating business and revenues.

“But while Nortel has been able to keep its creditors at bay, it has suffered sharper-than-expected declines in revenue in some of its most important product lines,” Bagnall wrote.

“This was likely the catalyst for senior management and the board of directors to accelerate their push for selling company assets.”

Bagnall reinforces several recent media reports that Nortel is considering sale of its units rather than reorganize under bankruptcy protection. The company, which employs some 2,000 people in the Triangle area, received a 90-day extension for its reorganization efforts from U.S. and Canadian courts this week. The original deadline was May 1.

Other media reports have said that Nortel is considering selling its 50 percent plus one share ownership in a manufacturing joint venture with a South Korean firm. That Nortel unit has a substantial amount of cash available.

A Nortel spokesman, Ronald Alepian, told Bagnall that the firm would provide an update on its reorganization plans “later this week or next.” He also told Bagnall that Nortel board of directors during the bankruptcy have been totally supportive of Chief Executive Officer Mike Zafirovski. The former Motorola executive was hired to turn around Nortel in 2005.

Bagnall laid out a scenario for the possible sale of Nortel’s top units:

• In coming weeks: Enterprise business unit, to possibly Avaya or Siemens Enterprise Communications Group
• Within five weeks: Nortel’s optical technology group to either Huawei Technologies, Alcatel-Lucent, Fujitsu or a private equity firm
• This summer: Wireless networking gear, possibly to Nokia Siemens Networks.

“Assuming the sales actually happen - these deals often involve multiple players and sudden shifts in bidding tactics - this would be the end for Nortel,” Bagnall said.