Avaya wins Nortel enterprise unit with $900 million bid

Posted September 14, 2009

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— Avaya will acquire the Enterprise Solutions business and other assets from bankrupt Nortel for $900 million, Nortel announced early Monday.

The news will directly affect a portion of Nortel’s remaining 1,800 employees at its campus inn RTP.

Nortel declared Avaya the winner in an auction that had been approved by bankruptcy courts in the U.S. and Canada. The auction started Friday. At least one other firm entered the bidding, thus helping drive up the price to nearly double Avaya's original offer. Siemens Enterprise Communications also wanted the Nortel business.

However, Avaya may still face other hurdles in making the deal. Verizon has challenged the acquisition in court, but Avaya said it would work with Verizon to resolve concerns about customer support and other matters.

Avaya was the frontrunner entering the auction, having made a $475 million so-called “stalking horse” bid. The court-awarded distinction enabled Avaya to match other offers.

As part of the deal, privately held Avaya also agreed to offer $15 million for employee retention bonuses.

"Our successful bid brings us closer to adding Nortel and its complementary channel, portfolio, research and development and global presence to Avaya," said Kevin Kennedy, Avaya's chief executive officer, in a statement. "We believe the acquisition brings inherent value to both organizations' customers, employees and partners, and we look forward to its successful conclusion."

If the bankruptcy courts approve the auction’s results, Avaya also will acquire Nortel Government Solutions and DiamondWare, Ltd. DiamondWare is a software development firm based in Arizona.

A combined Avaya-Nortel business also would surpass Cisco as the top provider of enterprise telecom equipment, with 27 percent marketshare compared to 21 percent for Cisco, according to analyst firm Frost & Sullivan.

"This is fantastic news for our customers, as this will empower us to continue to deliver industry-leading solutions and services focused on unlocking the enterprise business potential enabled by unified communications,” said Nortel Enterprise Solutions President Joel Hackney.

“It provides the capability to chart our future with laser-focus, enabling customers to compete in new ways with greater scale and resources,” he added in a statement. “We look forward to working closely with our customers, partners and stakeholders during this pre-close phase to ensure that we continue to innovate to meet customers' needs with high-performance, efficient and secure communications solutions.”

The Enterprise unit provides phone systems and other equipment. It generated some $2.4 billion in revenue in 2008.

Avaya first bid for the business group in July.

Nortel has already sold off its wireless business to Ericsson for more than $1 billion.

Still up for sale is Nortel’s Metro Ethernet Network business.


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  • samdutes Sep 14, 2009

    Ahhh, yes, I remember, but we did get health care for 30 days, at least I did. With the new package after Chapter 11 we didn't get the "bonus" 60 days when we were technically still employed.

  • JCH Sep 14, 2009

    Don't be fooled. JHackney probably has a very generous golden parachute! With the money he has made he shouldn't need severance.
    Oh, and yes, prior to Chap11 USA employees got healthcare for the length of their severance at the employee payroll rate or 90 days whichever was longer. Cobra was available thereafter. Somebody slipped one past you if you didn't get it.

  • Frank Downtown Sep 14, 2009

    If they keep the business here or at least move some portion of it here that would be great for the local job market.

  • samdutes Sep 14, 2009

    As a laid off employ I can only hope slaphappy Hackney doesn't get an offer from Avaya. If he doesn't then maybe he'll get laid off from what's now left of nortel and not get any severance.

    Oh, btw, we have never gotten any health care when people were laid off even before Chapter 11, unless you count the first 30 days of the old package. After that it was either COBRA or some other private health care option. In the USA that is.

  • ncwebguy Sep 14, 2009

    Free market? Really?

    For the memory impared, Nortel execes cooked the books for years during and after the dot com boom, the exact opposite of a "free market". For the mentally impaired, this is the equivalent of secretly replacing the actual financials with Folgers crystals, and told everyone they were paying for and drinking real coffee.

    A free market has access to the truth. An unregulated market with rampant greed and theft has no such access.

    Thousands of people were laid off to artifically inflate the stock price. In the case of a real free market, Nortel would have been punished for hiring people it did not need or punished for laying off people it did need. Neither of these things happened because money managers pumped up the stock and then unceremoniously dumped it for profit. The widgets Nortel made was irrelevant.

  • Sumo Vita Sep 14, 2009

    How on earth is the Nortel sale a good example of a functioning free market economy? If anything, it's a classic example of how the allegedly free market really isn't.

    The only stockholders capable of "holding board members accountable" are those with enough stock to have that clout - the executives and the board members themselves. Not to mention that the board member appoint the CEO, who appoints other executives and members of the board. Talk about the fox watching the hen coop!

    Not all the stockholders lost out: the big investment houses pulled their money out of this sinking ship a long time ago. It's the small investors and employees that got the shaft. And even after thoroughly raping the latter monetarily, the executives STILL made out like bandits with "retention" bonuses and golden parachutes.

    The "free market" is just a canard to keep enough people emotionally invested to fight regulation. Sadly, that ploy is apparently still working.

  • Sumo Vita Sep 14, 2009

    "The stockholders, employees, etc. lose out because the upper management were criminals. The free market isn't free, it's driven by money, power, and corruption. Without oversight, the free market becomes a series of monopolies. Power corrupts."

    Well said. This "free market" myth keeps millions mindlessly doing the bidding of those that control it. Market forces do work well, but not without oversight. The collapse of the financial system - after being gutted by all those free market types - speaks volumes to this fact.

  • JCH Sep 14, 2009

    As part of the deal, privately held Avaya also agreed to offer $15 million for employee retention bonuses.
    Wonder how much of this Joel Hackney gets? How many of the executives who helped drive Nortel into the ground will get another undeserved "retention" bonus. This money needs to go to laidoff employees struggling with no severance or healthcare!!

  • jockeyshiftspringer Sep 14, 2009

    Did some research on Avaya, look like they farm stuff over seas. So yes, more job losses.

  • sorry Sep 14, 2009

    I use to work there in the mid 80s it was a very nice place to work had lots of fun there use to get off work and play softball and then family day came they would rent a theme park for us all.I drove by it not to long ago and I think wow what happen here, looks like they have moved or something god bless all the workers that are still there, all I can say is look for a new job that by it self is hard now days and just hang in there.