Siemens Enterprise Networks

Nortel Auction: Siemens was edged out by a $15 million nose

Toronto’s The Globe and Mail newspaper reported today that Siemens Enterprise Communications fell just $15 million short of beating out Avaya for Nortel’s enteprise division.

What the paper calls Siemens is probably more accurately described as a joint venture between private equity firm Gores Group and Siemens AG, who together own Siemens Enterprise Communications. Gores Group owns the controlling interest. Those two firms were reportedly working together to bid on the Nortel enterprise division.

If Gores and Siemens won,  the plan was to create a new company that combined Siemens’ market presence in Europe with Nortel’s presence in North America into a company that remained headquartered in Canada and offered a strong alternative to Avaya and Cisco, so says The Globe and Mail. In backroom negotiations with Nortel and the Canadian government that kicked off a year ago, before Nortel’s bankruptcy, Siemens had said that it would relocate its own headquarters from Munich to Toronto as part of the merger. Once the bankruptcy auction got underway, Siemens remained at the table.

But ultimately Siemens fell $15 million short of Avaya’s $900 million bid this week. Also, while Avaya’s offer was all cash, Siemens’ offer included $700 million in cash cash with an IOU for the rest. Apparently Siemens was trying to work out a loan from the Canadian government to help pay for the Nortel merger. The government backed away from those loan talks when Canada’s other major tech firm, Blackberry-maker Research In Motion, started grumbling about the prospect of Nortel selling off all of its various divisions to foreign companies, The Globe and Mail reported.

This has to be disappointing news to Canadian technophiles who have always had justifiable pride in Nortel’s status as the nation’s top tech firm. Now, the Globe and Mail reports, Avaya will ship all top executive jobs of Nortel’s enterprise division south of the border, probably to… gasp… New Jersey. And the paper says Avaya will probably cut 25% of Nortel’s workforce, including layoffs of 400 of 1,000 employees at plants in Ontario.

Nortel auction: Avaya or Siemens-Enterasys will bid for UC business

Nortel is breaking apart.

The former crown jewel of Canada’s high-tech industry revealed today that it will sell off its CDMA and LTE wireless telecom infrastructure division to Nokia Siemens Networks (NSN) for $650 million. Nortel also revealed that it will sell of the rest of its assets. According to reports, the CDMA division generates $700 million in annual revenue, which means means that NSN will make back its money inside of a year. NSN has also established a low bar for the sale of all of Nortel’s other business units.

A sale of Nortel’s enterprise telephony and unified communications businesses is will probably follow soon. A couple months ago at VoiceCon Orlando, there was plenty of buzz circulating that Avaya and Siemens-Enterasys were both looking to acquire Nortel’s UC business. Neither of them, according to rumors, are interested in technology. Instead, they want the customer base.

A company that’s only looking for access to installed customers might not be willing to pay much for Nortel’s UC division. However, NSN’s $650 million deal with Nortel is so shockingly low that it has certainly driven down Nortel’s asking price for its UC business. The only question now is whether the price has been pushed low enough for Avaya or Siemens to pull the trigger. If that happens, Nortel customers will find themselves with two choices: They can accept whatever incentives the winning bidder offers Nortel customers to buy into their own products, or they can start looking elsewhere.