Nortel Sells Wireless Business Unit To Alcatel for $320 Million

Nortel's

wireless unit focused on universal mobile telecommunications system (UMTS) technology became a reality on Friday.

Nortel (NYSE: NT) said it was selling the business unit to rival

Alcatel

in a deal worth $320 million.

The companies had been rumored to be in negotiations for a sale over the past several weeks. Alcatel is also in the process of buying Lucent.

Nortel is selling the unit in part to concentrate on other areas of business, said Chief Executive Officer Mike Zafirovski. Refocusing Nortel on fewer areas of business where it has a chance to grow market share has been a key objective for Zafirovski since he took over Nortel late last year.

"Nortel is sharpening its focus on the markets in which we intend to lead," Zafirovski said in a statement. "Our UMTS access business lacks the scale and momentum needed to become profitable."

The deal does not mean Nortel is dropping interest in wireless communications. Rather, the telecom gear manufacturer, which employs some 2,100 people in RTP, wants to focus on what it calls "next-generation mobility". Other points of emphasis are enterprise transformation, services and applications.

"With next-generation mobility, we see an opportunity to change the game by applying our networking expertise and technology innovation to significantly alter the economic paradigm of mobility solutions in the future," Zafirovski said.

Nortel is among the leaders of wireless fidelity, or WiFi, technology for mobile broadband access.

"We are absolutely committed to mobility and plan to lead the 4G evolution and play a key role in the mass market adoption of mobile video and multimedia services." said Richard Lowe, president of Mobility and Converged Core Networks at Nortel.

Nortel is also actively involved in development of wireless technology known as code-division multiple access (CDMA) and global system for mobile communications (GSM).

In a statement, Nortel said that it "anticipated" the majority of its employees in the UMTS unit would transfer to Alcatel.

"The expertise of Nortel's UMTS team is well-known, and I am confident that our combined forces will pave the way for further success in the wireless market," said Marc Rouanne, president of Alcatel's mobile communications activities. "We are committed to support and evolve our extended customer base."

Alcatel is still in the process of closing on its $25 billion acquisition of Lucent.