Archive for the ‘M&A’ Category

Should Motorola Buy NT?

February 14, 2007

24/7 Wall St.’s Douglas McIntyre writes that Motorola may want to take a run at buying Nortel. With $11-billion of cash, he believes this Motorola could benefit from Nortel’s turnaround and its exposure to Wi-Max. “Nortel’s market cap is $13 billion. Perhaps Motorola could put all its cash to good use,” he concludes.
Thoughts?

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So What Next, Mr. Z.?

February 9, 2007

In the wake of Nortel’s decision to eliminate 2,900 employees over the next two years to save $400-million in operating costs, one question that still lingers is what Nortel wants to be when it “grows up”. Despite some asset sales (the UMTS business to Alcatel, the sale of the blade server division to U.S. investment bankers, etc.), Nortel is still a company with diverse operations, although probably not the all things to all people supplier that ex-CEO Frank Dunn was so keen on nurturing.

So, what does current CEO Mike Zafirovski do now that it appears the foundation work is close to be finalized? Does he make an acquisition? If so, how big does/can he go? Does Nortel stay small and strategic, and make $100-million acquisitions akin to the deal for Tasman Networks? Or does it go big to establish a leading role in the IP-TV or enterprise markets?

During a speech in Ottawa yesterday, Zafirovski talked about his six-point program, which features “profitable growth”. The sixth guideline, he said, is Nortel wants to target major markets. “I’m not interested in just small skunk works,” he told the Ottawa Citizen. Interesting.

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Nortel’s IP-TV Targets?

February 8, 2007

VC Ratings has a post looking at Nortel’s potential M&A targets in the IP-TV market. It includes Minerva, Kasenna, Irdeto Access and Broadstream Communications.

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Nortel Looking for IP-TV Acquisitions

January 25, 2007

Minerva
LightReading must have some pretty good sources within Nortel these days. After writing about a speculated asset swap between Alcatel and Nortel last week, LIghtReading is reporting today that Nortel is planning several IP-TV acquisitions as part of an aggressive strategic focus on the telecom video market. “Nortel has revisited its IPTV strategy”, a source told LightReading, adding that Minerva Networks Inc. is the most likely first move for the giant vendor. In March, Nortel and Minerva signed an agreement to jointly develop an application interface that enables the integration of real-time IPTV services with Minerva’s iTVManager software. Update: Minerva was named one of the 2006 Fierce IPTV 15 earlier this year.

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UBS on a Nortel-Alcatel Asset Swap

January 23, 2007

Amid speculation Nortel and Alcatel could do an asset swap (Nortel’s GSM business to Alcatel; Alcatel’s enterprise unit to Nortel), UBS analyst Nikos Theodosopoulos said in a report that while the deal reflects the growing belief Nortel will de-emphasize wireless in favor of the enterprise market, it’s unclear how a deal would be structured. The issue, he said, is that Nortel’s $2-billion GSM business has declining revenues, while Alcatel’s $1.5-billion enterprise business is growing by mid-single digits. As a result, Theodosopoulos believes Alcatel’s business is worth “several hundred million [dollars] more than Nortel’s so Nortel “may have to put forth additional cash/assets to close such a deal.”
That said, Theodosopoulos said an asset swap would benefit both companies by enhancing Nortel’s status as the leading vendor in the global enterprise voice market (increasing its market share to 22% from 14%), while Alcatel’s share of the GSM business would to 18% from 11% (Ericsson has 38%, while Nokia/Siemens have 32%}.

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A Nortel-Alcatel Asset Swap?

January 20, 2007

If you believe in the adage “where there is smoke, there is fire”, LightReading reports there could be a deal on the horizon that could see Nortel swap its $2-billion GSM business for Alcatel-Lucent’s $1.2-billion PBX unit and possibly other assets such as cash and/or an enterprise-related unit. Lightreading suggests the deal makes sense because Nortel only has 7% of the GSM market – far below the 20% benchmark that Nortel CEO Mike Zafirovski wants each business unit to possess. If Alcatel got hold of Nortel’s GSM unit, it would have 17% to 18% market share, while Nortel would get a leading position in the European IP PBX market. Stay tuned.

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Nortel Looking To Go Shopping

January 18, 2007

After spending the past year and a bit restructuring Nortel and dealing with its accounting troubles, CEO Mike Zafirovski says the company is “stable enough” to make an acquisition, according to a Reuters story. “”I am much more comfortable that we have a foundation in place right now within Nortel from an operational and financial processes standpoint,” he said during an interview, adding “we would not be gun shy from adding something to our portfolio, and actually we’re looking at some opportunities.” Mike Z.’s shopping list is focused on the enterprise, next-generation mobility and network services sectors. It would presumptuous to assume Nortel is going make a large deal given it needs to be careful about managing cash, as well as the fact the deals made during Mike Z.’s reign so far have been relatively small (e.g. $99-million for Tasman Networks).

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Trapeze Considering IPO

January 3, 2007

Trapeze Networks, which generates a lot of revenue from an OEM relationship with Nortel, could be considering an IPO in 2007. According to a LightReading story, the enterprise Wi-Fi start-up could be following in the footsteps of rival Aruba Wireless, which has filed for a $100-million IPO. If Trapeze does go public, it could see the company build out its own brand sales, which could see fewer sales of Nortel gear. Of course, it wouldn’t be all bad new for Nortel, which took part in Trapeze’s $30-million D round investment earlier this year in a deal that also included Juniper. Nortel also made an investment in 2005 when Trapeze raised $22.5-million . Before Nortel got involved with Trapeze, it used to rebrand and sell equipment from Airespace Networks until the company was purchased by Cisco for $425 million.

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The Deal is Done!

January 2, 2007

Nortel has finally completed the sale of its UMTS business unit to Alcatel-Lucent (Isn’t it time for a new name yet?) for $320-million in cash – “less significant deductions and transaction related costs” (How much is “significant”?). Just out of curiosity, does AL simply wire the money into Nortel’s bank account, or does Patricia Russo write a check to Nortel CEO Mike Zafirovski, or does Brinks roll up to Nortel’s corporate HQ and drop off a few dozen bags of cash?

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Can Nortel Stay Independent?

December 26, 2006

Blogging Stocks questions whether Nortel can stay independent given it is trading at a market cap to sales ratio lower than Alcatel-Lucent and Motorola, and the lacklustre performance of Nortel shares recently. “There are several companies that might find Nortel an attractive acquisition. The list would be lead by Motorola, Cisco Systems Inc., and Alcatel-Lucent,” opines Douglas A. McIntyre, a partner with 24/7 Wall St.

Ericsson Buying Redback for $2.1B

December 20, 2006

Anyone who was hoping Nortel would snap up Redback Networks to expand its router business is going to have to think about a new strategy after Ericsson made a $2.1-billion offer for Redback. The cash offer of $25 a share is a modest premium of 18% over Redback’s closing price yesterday, and now puts Ericsson in head-to-head competition with Cisco. “The router business was an obvious gap in their offering,” said Joergen Vrenning, a Stockholm-based fund manager at Catella Capital told Bloomberg. “It is now a pretty big player in this field too. If anyone is able to bring these products to the market, it’s Ericsson.”
Obviously, Nortel doesn’t have the cash to make an all-cash offer of this size so it’s been forced to make small deals such as the $99-million purchase of Tasman Networks about a year ago. One thing about the Ericsson-Redback deal that is interesting is how it illustrates how well Ericsson has been restructured in recent years after it struggled when the telecom boom ended.

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Nortel-Alcatel Sign Definitive Agreement

December 4, 2006

In some more housingkeeping, Alcatel-Lucent has signed a definitive agreement to buy Nortel Networks Corp.’s UMTS radio access business for US$320 million. Alcatel-Lucent will acquire Nortel’s UMTS radio access technology and product portfolio, as well as customer contracts. About 1,700 people will join Alcatel-Lucent, including 1,100 R&D engineers based mainly in France, Canada and China.

Nortel’s Takeover Prospects?

November 26, 2006

The Toronto Star has a short story looking at possible takeover candidates within corporate Canada. Not surprisingly, Nortel makes the list. Here’s the Star’s take: Post-telecom bust, the telecom-equipment sector is consolidating. Weak sister Nortel matches up nicely as a North America partner to European peers Telefon AB L.M. Ericsson of Sweden, Germany’s Siemens AG and Alcatel SA of France”. Thoughts?

IS PEC Solutions on the Block?

November 14, 2006

In a research report, Orion Securities analyst Duncan Stewart suggests Nortel Government Services (formerly known as PEC Solutions) is doing “very badly”, “about to do worse” and could be dumped as a “distress sale” for about $200-million (less than 50% of the $448-million all-cash purchase price two years ago). Stewart’s assertion came after he went through Nortel’s recent 10-Q filing, which shows NGS is struggling amid the delay and/or cancellation of U.S. government contracts. Stewart finds it interesting Nortel has lumped NGS into the “other” category in financial filings with Q3 revenue, which accounted for Q3 revenue of $60-million and $249-million on a TTM basis. “Interestingly, that implies that Q3 NGS sales are lower than last year and lower than the quarterly run rate from the first half of 2006,” he said. “Assuming that NGS is 95% of Other revenue, the business has not grown since Nortel bought it.” PEC was acquired during the resign of Bill Owens, who had strong ties to Washington through his career in the U.S. military. Nortel touted PEC as a core part of its goal to generate more U.S. government business. It paid a premium for PEC, which was seen as a second-tier systems integrator.

Nortel: We’re Acquisition-Friendly

October 13, 2006

Hmm, I wonder what this means:

“If there’s a good opportunity that makes strategic and economic sense for us … we don’t feel constrained to act on it,” – Nortel chief strategy officer George Riedel, who told Reuters that the company does not feel constrained in its ability to make acquisitions. While Nortel be may be open to the idea of acquisitions, the reality is its appetite can’t be too big because the company doesn’t have a strong enough balance sheet. Its cash position is shrinking, no one is going to accept Nortel stock as a part of a deal, and the company has so many shares outstanding, it can’t even think about doing an offering that would dilute its existing shareholders even more. Therefore, the reality is Nortel will likely pursue tiny deals (less than $100-million) and partnerships long before it ever can think about doing something more significant.