Nortel Sells VOIP Business to Genband

Nortel Networks, just over a year into its bankruptcy, is selling off its last significant business by accepting Genband's $182 million offer for its VOIP business. Nortel over the past few months already had sold off the bulk of its units, including its wireless and enterprise businesses. The deal leaves Nortel with only a handful of assets, such as its multiservice switch business.

Nortel Networks, which has sold off significant parts of its business since filing for bankruptcy protection in January 2009, is now selling its voice-over-IP unit.

Genband, a small company based in Plano, Texas, has agreed to buy Nortel's VOIP business for $182 million, Nortel announced Feb. 24. Nortel officials said they expect to close the deal in the second quarter after gaining regulatory approval in the United States, Canada and Israel. The two companies have scheduled a joint hearing March 3 before U.S. and Canadian regulators.

Nortel's CVAS (Carrier VoIP and Application Solutions) unit is the last major part of the company to be sold, although Nortel still holds some assets, according to a spokesperson.

In June 2009, Nokia Siemens Networks bought Nortel's CDMA (Code Division Multiple Access) wireless business and most of its LTE (Long Term Evolution) technology for $650 million. After that, Avaya bought Nortel's enterprise business for $900 million, Ericsson bought the wireless business for $1.13 billion, and Ciena bought Nortel's optical networking and carrier Ethernet businesses for $532 million.

Unlike most of those deals, Genband is buying the Nortel business through a direct deal rather than a bid. In December, Genband had put in a "stalking horse" bid, designed to set the lowest limit for bids. However, no other company placed a bid for Nortel's VOIP business.

In the deal, Genband will get all of the CVAS product platforms-included softswitches, gateways, SIP (Session Initiation Protocol) applications and TDM (time-division multiplexing) products and services-as well as patents and all of Nortel's CVAS customer contracts. TDM networks transmit data in dedicated end-to-end circuits.

Genband officials said they see the deal as giving the company the tools to enhance its IP switching capabilities.

"By melding these market-leading technologies into Genband, we will create the most comprehensive, standards-based switching portfolio in the world," Charles Vogt, company president and CEO, said in a statement. "Our vision is to fuel the industry's desired network migration path to cutting-edge IP technology by instituting open standards, open interfaces and interoperability. No other supplier will be better positioned to [offer] service providers a more cost-effective means to optimize their existing fixed TDM networks, and transition from fixed TDM to IP and from fixed to mobile convergence."

Throughout the past year, Nortel officials have said selling off the company's business units was the best way to ensure that Nortel's technology continued and that as many jobs as possible could be saved. That was also the case with the Genband sale, according to Samih Elhage, president of Nortel's CVAS unit.

"Joining forces with Genband will allow us to continue to provide a highly reliable solution and service offering to service providers and enterprises across the globe," Elhage said in a statement. "I am also pleased that a significant majority of Nortel's employees ... will have the opportunity to continue their innovative work with Genband."

Nortel filed for bankruptcy after turnaround efforts in 2008 did not work. Officials at the time placed much of the blame on the shaky economic conditions that they said hobbled turnaround efforts.

President and CEO Mike Zafirovski, along with several board members, resigned in August 2009, after the company announced a quarterly loss of $274 million.

Nortel spokesperson Jamie Moody said in an interview that the company's eventual goal is complete divestiture, though at this point it's still unclear what officials will do with the remaining assets.

Those include the MSS (Multiservice Switch) business-formerly dubbed "Passport"-its stake in the alliance with LG and some patents related to what's left of its LTE business.

"There have been discussions [about the fate of those assets]," Moody said. "No decisions have been made."