Nortel's Last Gasp

One time giant announces it has raised $7.8 billion for the sale of its business units.

By Sean Michael Kerner | Posted Aug 10, 2012
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In January 2009, Nortel Networks declared bankruptcy. It was the beginning of a process that saw the one time telecom and networking giant fall completely apart, as all of its constituent business units and patents were sold off.

After more than three years of selloffs, the end of the Nortel bankruptcy saga is nearly in sight. Late Thursday, Nortel announced its second quarter fiscal 2012 financial results. The company also announced that as of the third quarter, it would no longer be reporting quarterly or yearly financial results.

Though Nortel no longer has any operational business units, the company still reported a net loss in the second quarter of $131 million. That loss includes an interest expense of $86 million, a currency exchange loss of $8 million, and reorganization items of $6 million.

Nortel generated zero dollars of revenue during the quarter and didn't sell any more business assets either.

"Through the creditor protection process, Nortel has sold all of its businesses and remaining patents and patent applications generating approximately $7.8 billion in net proceeds for the benefit of its creditors, and preserving 16,000 jobs for employees with the purchasers of the businesses and assets," Nortel said in a statement.

Though some vendors early in the process had hoped that Nortel would emerge out of the bankruptcy process, that never happened. Nortel's re-organization from the beginning was all about carving itself up and selling the pieces to the highest bidder.

Nortel's core enterprise business networking business was sold to Avaya for $900 million, in a deal that closed in September of 2009. Avaya had originally bid $475 million for the Nortel unit, but was forced to raise the price as part of a stalking horse auction process. Since 2009, Avaya has worked to integrate the Nortel assets into its own business. Avaya's networking division is now led by Marc Randalland is continuing to push forward on the Nortel legacy.

Nortel's carrier business was sold to Ciena for $774 millionin a deal that closed in March of 2010. Like Avaya, Ciena has pushed forward on former Nortel technologies including a strong push in the 100 Gigabit Ethernet space.

On the mobile front, which was one of Nortel's core strengths, those assets were sold to Ericsson for $1.13 billion. Genband acquiredNortel's Carrier VoIP and Application Solutions (CVAS) business for $282 million in June of 2010.

Patent and IPv4

Business units aren't the only thing that Nortel has sold in the last three years. The company also sold a pool of 666,000 IPv4 addressesto Microsoft for $7.5 million.

The last major asset that Nortel sold was its vast patent portfolio of over 6,000 technology patents. The winning bid came from a consortium of vendors including Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony that collectively paid $4.5 billionfor Nortel's patents.

While Nortel's bankruptcy has been successful at selling business assets, that success is not likely to translate into success for Nortel shareholders.

"As previously announced, Nortel does not expect that the Company's common shareholders or the NNL (Nortel Networks Limted) preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests," the company said in a statement.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.

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