The Future of UMTS: Partner or Sell

Nortel CEO Mike Zafirovski didn’t spill the beans on the future of the company’s UMTS access business yesterday but he did make it clear there are just two options: find a partner or sell it. So what could Nortel get for the money-losing unit, which has sales between $250 million and $350 million? Desjardins Securities analyst Paul Howbold suggests as much as $1-billion, which Nortel could use to finance new R&D or make strategic acquisitions. The potential buyers are no surprise: Motorola or Alcatel. The question is what Nortel wants to be when it grows up? In other words, after it sells off or exits parts of the business that don’t have the 20% market share that Mike Z. wants, what’s left. Will Nortel essentially be a wireline supplier to the carrier and enterprise markets with some wireless assets to support its core technology? As for the second-quarter results yesterday, people were unimpressed with the 1 cent a share loss and the drop in gross margins to 38%. Investors and analysts want progress but it isn’t happening quickly. BusinessWeek has a story suggesting Nortel can thrive if it focuses on its core business. An interesting comment comes from Sanford Bernstein analyst Paul Sagawa who suggests Nortel could shrink to a $4-billion to $5-billion entity (half its current size) as it focuses on core operations.

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3 Responses to “The Future of UMTS: Partner or Sell”

  1. Adam Says:

    Richard Lowe informed the managers of Mobility and Converged Networks that as of business end Friday August 4th there is a hiring freeze in effect. That’s the surest sign that something is coming down the pipe.

  2. Godzilla Says:

    it’s also a time honored 2nd half budget conversation measure designed to reduce the risk of reaching earnings. It is often closely followed by a layoff plan. Does it work like that at GE also?

  3. ExNortelDontLookBack Says:

    In the last 5 years the only thing Nortel has managed to do efficiently is implement continuous layoffs. Guess that comes from lots and lots (and lots) of practice. That and take a 20% share of the routing and switching market (Bay) and turn it into a big bag of nothing.

    I still have friends there, although I cannot fathom their loyalty to a company as demonstrably and continuously F’ed up as this one is. I point and laugh when I drive by.

    From the people who brought you “Webtone” – “I Speak IP” and “Right Angle Turn”

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