Nortel’s Carrier VoIP Unit on the Auction Block

Nortel is set to exit 2009 as little more than a shell of its former self as the beleaguered network telecom vendor works to sell off its assets. That effort continues with a new Nortel asset now on the auction block: its Carrier VoIP and Application Solutions (CVAS) business.

Already, there’s been some interested in the unit. IP gateway vendor Genband has made a “stalking horse” bid for Nortel’s CVAS business, with a starting offer of $282 million.

The move, officially known as a “stalking horse” bid,” means that Genband’s offer has set the floor price for an auction through which other vendors could try and potentially out bid it. The final auction date will be set in early January after Nortel receives U.S. and Canadian court approvals for the CVAS sale.

It’s the latest development for Nortel, which entered bankruptcy protection at the beginning of 2009 and has been selling off its assets ever since.

The CVAS purchase could be lucrative for privately held Genband. Carrier VoIP has proven to be a big business for Nortel with shipments of over 118 million carrier VoIP ports globally. According to Nortel, even as the company has been under bankruptcy protection, it has added over 40 new carrier VoIP customers this year alone.

“Your successful market share gains in a difficult 2009 speak to your dedication, commitment and focus, and we believe CVAS is a strategic division with innovative technology and talent that would thrive at Genband,” Genband President and CEO Charlie Vogt wrote in an open letter to Nortel CVAS employees.

Vogt added that the proposed transaction would bring together a comprehensive portfolio of VoIP solutions.

“By melding your carrier VoIP and softswitch expertise with our highly successful IP gateway portfolio, we have a unique opportunity to fuel affordable network migration to cutting-edge VoIP technology,” Vogt said.

As part of the bid, Nortel said in a statement that a “significant majority of CVAS employees would have the opportunity to continue employment with Genband.”

The Nortel CVAS selloff follows three other major Nortel divestitures in 2009. Nortel’s enterprise unit, which includes unified communications for businesses, went to Avaya for $900 million, while its carrier wireless assets were sold to Ericsson for $1.13 billion.

Ericsson also acquired Nortel’s GSM assets in a separate auction valued at $103 million.

Another Nortel unit sale is in the process of being completed: the company’s Metro Ethernet and Optical unit. Networking vendor Ciena won the auction for the assets in late November with a bid of $769 million.

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