TORONTO - A stronger, but significantly smaller, Nortel Networks Corp. could emerge from the rubble of the troubled Canadian telecom equipment maker if rumours of talks to sell its two main businesses to rivals prove true, according to one industry expert.
Duncan Stewart, director of research and analysis at DSam Consulting, said Nortel can survive, even if it sells off its core wireless-equipment business and a separate unit that builds telecom systems for offices, as a Wall Street Journal report suggests.
"Although it will be a very different company if it sold its wireless business, it would still have good assets that are more than capable of supporting a restructured Nortel as a stand-alone technology company," Stewart said.
The Journal reported Thursday that the Toronto-headquartered company - which gets most of its revenue from outside Canada - has been able to attract interest in the sale of its two core businesses, which posted a combined US$6.7 billion in sales last year.
An unnamed source told the paper that the company has found more value in selling the assets, and was surprised by the amount of interest generated by the two operations.
Nortel has declined to comment on the report.
Stewart said that Nortel faces "a very delicate balancing act" because it will have to determine which parts of the business have interested buyers, but aren't crucial to the company's future survival.
"You don't want to sell all the good stuff and be left with trying to build a company around all the stuff that nobody else wants," he said.
He said getting rid of the wireless division "is a complete no-brainer."
"It's producing a lot of revenues and earnings right now but it is absolutely not the future of any company," Stewart said.
Nortel shares fell half a cent to close at 9.5 cents on Thursday at the Toronto Stock Exchange. The company's shares, prior to a 10-for-one stock consolidation, were once worth more than the equivalent $1,200 in mid-2000.
The Journal said that Nortel has held talks with potential buyers including Avaya Inc., which is backed by a private-equity consortium, and Siemens Enterprise Communications, a joint venture of Siemens AG of Germany and Gores Group LLC, quoting sources familiar with the matter.
Nortel also is in talks to sell the unit that sells wireless voice gear to rivals, including Nokia Siemens Networks, which long has sought to expand its presence in the U.S. Nokia Siemens is a joint venture of Nokia Corp. of Finland and Siemens, the paper reported.
Both Avaya and Siemens declined to comment on whether they're either interested in Nortel divisions or if they're in talks with the company, citing their policies about commenting on speculation.
The Journal said several competitors have expressed interest in buying Nortel's enterprise unit, which makes communications networks for corporations.
Nortel, which has been restructuring under court protection since January, has said it was seeking to sell non-core businesses during the process and is expected to outline its restructuring plan publicly in April or May.
The company is required to seek the most value for creditors as part of the bankruptcy proceedings, which include holders of US$4.5 billion in debt, former staff members owed severance pay and retired managers who were paid through a company pension plan that used operating funds.
Nortel next appears in court on March 20 in both Canada and the United States to deal with matters related to its bankruptcy protection.
