Nortel in '09: Dismantling of a tech stalwart

We take a look at the business decisions which pulled down the networking behemoth

In July, former Bay Networks CEO Dave House (Nortel bought Bay for about $8 billion in 1998 only to watch that business decline over the next 10 years) suggested Nortel spin off the enterprise business as a stand-alone entity and "rename" it Bay Networks. Too late: Avaya made the earlier speculation official when it offered $US475 million for Nortel's enterprise assets.

And later that month, Ericsson emerged as the winning bidderfor Nortel's CDMA and LTE wireless assets by agreeing to pay $1.13 billion for them, almost twice the initial offer from Nokia Siemens.

August saw Nortel CEO Mike Zafirovski leave the company following a determination by Nortel's board that the company had reached a "natural transition point." Zafirovski had failed to revitalize the bankrupt telecom giant as he had planned when he took the reins in 2005.

In September, Avaya officially won Nortel's enterprise business but it had to almost double its initial offer, and jump through some flaming hoops ignited by Verizon. The carrier, which resold Nortel's VoIP product, went to court to win assurances from Avaya that Verizon customers would not be left out to dry on service and support contracts. Avaya promised "near-term" support for those customers.

Nortel's Metro Ethernet business attracted Ciena in October, to the tune of $521 million. And then ex-CEO Mike Z re-emerged -- to sue Nortel for $12 million in back pay, bonuses and benefits he claimed was owed him, even after failing to revitalize the company. That litigation was still pending at press time.

Late November saw Ciena win Nortel's Metro Ethernet business by upping its price to $769 million. And Ericsson and Kapsch acquired Nortel's GSM wireless assets for about $103 million.

With Metro Ethernet, enterprise and wireless operations sold off, and WiMAX shuttered, what is left of Nortel is essentially the Carrier VoIP and Applications Solutions group, which includes softswitches, media gateways and applications. But that too is for sale and the company is in maintenance mode while preparing for what seems to be an eventual extinction.

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Tags Ericssonnortelmetro EthernetCienabay networksradwareAvaya

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Jim Duffy

Network World
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