Nortel selects Avaya as winning bidder for Enterprise Solutions

TORONTO - Nortel Networks (TSX:NT) has selected Avaya Inc. as the successful bidder for its Enterprise Solutions division.

TORONTO - Nortel Networks (TSX:NT) has selected Avaya Inc. as the successful bidder for its Enterprise Solutions division.

Avaya has agreed to pay US$900 million, with an additional US$15 million for an employee retention program.

Nortel said Canadian and U.S. court approvals will be sought at a joint hearing on Sept. 15.

“This is fantastic news for our customers,” Nortel Enterprise Solutions President Joel Hackney said in a statement early Friday.

“It provides the capability to chart our future with laser-focus, enabling customers to compete in new ways with greater scale and resources.”

The enterprise unit supplies landline phone systems and other communications equipment to businesses and large organizations around the world.

The division made US$2.4 billion in revenues in 2008.

Avaya had submitted a $475-million stalking horse bid for the enterprise division in July.

Nortel still plans to auction its prized Metro Ethernet Networks business, which some analysts say could fetch up to $1.5 billion. A date hasn't been set for the auction or the submission process.

The company's ethernet division is considered one of its strongest assets because it includes the rights to technology that enhances the speed and capacity of current fibre optic networks by as much as 10 times.

Faster connections are highly lucrative in the current market as more people watch video and transfer large files online.

LM Ericsson's agreed to pay US$1.13-billion for Nortel's wireless assets in an auction in July.

Verizon Communications Inc. had objected the Avaya's participation in the enterprise division auction.

The U.S. broadband and telecommunications company had said it believes that if Avaya Inc. wins the auction, it could risk U.S. national security.

In documents filed with a Delaware court on Thursday, Verizon said that Avaya refuses to maintain contracts for equipment Verizon bought from Nortel that's in use by U.S. federal government.

Verizon told the court in its filings that Nortel first notified them on Sept. 2 that Avaya wouldn't handle the contracts, if it won the auction. The company believes that Nortel won't have the capabilities to handle the contracts itself once the enterprise sale went through.

“As we work through integration planning, it is business as usual, and we will continue to focus on supporting our installed base,” Hackney said.

Nortel said it will work diligently with Avaya to close the sale later this year, subject to the timing of regulatory approvals. The sale close is expected late in the fourth quarter 2009.

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