bankruptcy

Nortel’s Alteon deal with Radware worth pennies on the dollar

And you thought you were underwater with your mortgage?

Back in 2000 Nortel bought application delivery switching vendor Alteon for about $6 billion in an effort to keep pace with rival Cisco. Nine years later, Nortel is bankrupt and it is trying to sell off assets as it restructures itself. Nortel announced last week that Radware was buying the asseets of the Alteon business, but neither company announced the value of the deal. Today the Ottawa Citizen published the numbers, based on a filing in U.S. bankruptcy court.  Radware will pay Nortel around $17.5 million. That’s less than 3% of what Nortel originally paid for the company.

Radware makes deal for Nortel’s application delivery business

One of the circling vultures has finally picked some of the juiciest meat of the bones of Nortel.  Israeli company Radware, an application delivery networking vendor, announced that it has agreed to buy Nortel’s Layer 4-7 appplication delivery switching business for an undisclosed sum. In the transaction Nortel is basically selling off the assets of Alteon WebSystems, a company it purchased nine years ago.

Nortel bought Alteon in 2000 for $6 billion in an effort to keep pace with Cisco, which had bought a competing company,  ArrowPoint Communications, just months prior for $5.7 billion.

Nortel is currently restructuring itself under Chapter 11 bankruptcy protection. According to U.S. bankruptcy law, the sale must be conducted at auction, so other companies have an opportunity to best Radware’s offer before the sale is finalized.

In its announcement of the deal, Radware said the Alteon products would be sold under the brand Radware Alteon. The company announced that it would offer a five-year support plan on Alteon products to ease the worries of existing Alteon customers. Radware plans to hire some of Nortel’s employees, it said.

Other vendors in the application delivery space have been trying to capitalize on the uncertainty surrounding Nortel and its Alteon line. For instance, F5 Networks announced plans to offer up to $9,000 worth of credit to companies that agree to trade in their Alteon switches for F5’s competing Big-IP switches.

If consummated, Radware’s acquisition of Nortel’s Alteon business will solidify its position as a strong competitor to F5, Cisco and Citrix in the application delivery networking market.

Aruba courts Nortel customers with multivendor WLAN management suite

Aruba Networks has joined the growing ring of vultures circling above Nortel Networks’ Toronto headquarters, where executives are busily trying to restructure Nortel while under the cover of Chapter 11 bankruptcy protection.

Aruba announced an “investment protection” program for customers of Nortel wireless LAN (WLAN) technology. The vendor is offering Nortel customers a discount on Aruba’s AirWave Wireless Management Suite, a WLAN management technology that can work in multi-vendor environments.

Nervous Nortel customers, who are worried that Nortel might not be around a year or two from now to support their wireless infrastructure, might find this offer from Aruba appealing. It gives them a a way of managing legacy Nortel infrastructure.

And Aruba no doubt sees this as a potential foot in the door with Nortel customers who will likely give new WLAN vendors a good luck when it comes time to refresh or expand their infrastructure. Today, Aruba can sell them AirWave. Next year, Aruba will have a better chance of selling them access points. Now if only Aruba had a wired networking division as well, they could attack Nortel on multiple fronts.

Nortel comes crashing down

Farewell old friend

Nortel Networks has filed for Chapter 11 bankruptcy protection. It seems last quarter’s $3.4 billion loss was the last straw. The company still has about $2.4 billion in cash on hand, which it will use to maintain operations while it restructures itself.

When news broke this morning that Nortel was filing for bankruptcy protection, an old and familiar image popped into my head: that of the starship Enterprise near the end of Star Trek III. Badly crippled in a battle with a Klingon vessel, the faithful old ship started her fatal descent toward the planet below. Captain Kirk and his crew safely beamed down to the planet and watched their beloved ship streak through the sky towards its demise.

But as fans know, the Enterprise was rebuilt and rechristened time and again for countless adventures in subsequent films and television shows. So, too, may Nortel.

Right now, the telecom industry has slowed its investment in new hardware. When will that trend reverse? No one knows. No doubt Nortel’s efforts to sell into enterprise networks are also suffering in this climate. And unified communications is still such an emerging market, the company obviously couldn’t hope to stay afloat with the quality products it’s been producing in that field.

Indeed, this is just the first of what promises to be several collapses in the networking industry. When Nortel emerges from bankruptcy, what kind of world will it find? And will it survive? Lots of companies disappear forever in an economy like this, even a company as old and revered as this Canadian giant.