Nortel Considering Break-Up of the Company

Canada's Nortel Networks, which is currently working through a restructuring may seek to break itself up rather than emerge from bankruptcy protection as a whole company. Citing people close to the issue, the Wall Street Journal said that the firm is in talks to sell it component divisions to two of its main rival.

Nortel has declined to comment on the report.

The company is understood to have attracted a level of interest in its two core operations - the wireless infrastructure division and its corporate telecoms hardware operations. The network infrastructure division posted sales of US$4.3 billion last year, while the corporate telecoms hardware business generated sales of US$2.4 billion. Together these two divisions accounted for around 45% of the firms sales, and analysts expect the remainder of the firm could operate as a stand-alone firm.

"What we are finding is that there may be a lot more value by selling rather than emerging," one of the people said. "The company was surprised by the amount of interest and the number of calls."

Siemens is emerging as a possible buyer for a large chunk of the firm, not just the corporate telecoms arm, but through its Nokia Siemens Networks joint-venture also the wireless infrastructure division.

Nortel's fate isn't yet clear. Concluding that the company is headed toward liquidation "would be very premature," a person close to Nortel said, adding that the sale of the two units wouldn't necessarily trigger a liquidation. Nortel's board will meet next week to review management's business plan for emerging from bankruptcy proceedings, the person said.

On the web: Wall Street Journal

Posted to the site on 13th March 2009