Nortel Sells UMTS Unit

Update: Nortel has agreed to sell its UMTS unit to – surprise, surprise – Alcatel for $320-million. Here’s a quote from CEO Mike Zafirovski: "Nortel is sharpening its focus on the markets in which we intend to lead. Our UMTS access business lacks the scale and momentum needed to become profitable." That’s an understatment given the UMTS business was losing an estimated $200-million a year on sales of $400-million to $500-million. Nortel held a conference call earlier today to provide an "update on advances to the execution of its business plan". It featured Zafirovski and Richard Lowe, president of mobility and converged core networks. At first glance, the selling price seems lower than the $500-million expected by many analysts. However, Nomura analyst Richard Windsor told Reuters that Nortel got a "reasonable price". Desjardins Securities analyst Paul Howbold said "while we are not surprised that Nortel has sold its UMTS business given the very difficult pricing environment, it raises serious questions about the company’s GSM business given the declining spending levels in developed markets and the lack of success in emerging markets (eg India). We also believe that without a footprint in UMTS, it is likely to complicate Nortel’s possible entry into 4G as it will not be the best positioned to transition carriers from UMTS to 4G."
Other views: Wireless Utopia says when the acquisition is completed, Alcatel will have 16% of the UMTS wireless network infrastructure market, trailing Ericsson, which has 30%. Mark Goldberg suggests with Nortel’s rivals getting bigger through consolidation, the company "will have to work harder to keep itself top of mind for its customers to call". GigaOm says he likes Mike Z.’s say-it-like-it-is approach – a common view among people who have heard Mike Z. give presentations.