Avaya Eying Nortel's Enterprise Business?

Late last week, Nortel said it is looking for buyers for each of its business units, including Enterprise Solutions. In addition, Nortel said it is auctioning off the bulk of its wireless unit, its LTE and CDMA Access carrier offerings, and Nokia Siemens Networks is leading the charge to the tune of $650 million.

The Nortel fire sale comes after the vendor filed for Chapter 11 bankruptcy protection in January and has apparently failed to create a plan to emerge successfully. The bankruptcy filing followed years of missteps by Nortel, a once-stalwart telecom player.

Avaya on Wednesday was mum on rumors that it is seeking to buy Nortel's Enterprise Solutions, despite reports in Canada's Globe and Mail that Avaya has made a $500 million offer.

"We can't comment on rumors or speculation," an Avaya spokesperson said in an e-mail to Channelweb.com.

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Avaya, however, has been capitalizing on Nortel's struggles of late. Just this month, the company launched a host of incentives for Nortel partners that add Avaya to their roster of solutions, a move Carol Giles Neslund, Avaya's vice president of North America channel sales, said is an aggressive move for Avaya to "get out there and get market share." So far, Giles Neslund said, Avaya has brought on 19 Nortel recruits.

Avaya's push to poach Nortel partners isn't necessarily unique, as a host of vendors have been trying to lead concerned and confused Nortel partners away from the flock since days after Nortel's bankruptcy protection filing.

The Globe and Mail added that if Avaya pulls out of the running to purchase Nortel's enterprise division, Nokia Siemens could also be a prospective buyer.

Along with getting offers on its Enterprise Solutions business, The Globe and Mail report noted that nine companies have shown interest in buying Nortel's Metro Ethernet unit, which could bring in about $750 million.

Nortel's looking to sell off all of its business divisions comes as attempts to restructure in the face of bankruptcy have failed. Currently, Avaya has rose as the front-runner to take over the enterprise portion, which handles Nortel's routing, switching and IP telephony product lines.

Nortel's Enterprise Solutions division is the company's second-largest business unit in terms of revenue and is the business that the Toronto-based company hoped would be its saving grace when the dust settled from the bankruptcy filing. But the unit has continued to struggle.

In the fourth quarter of 2008, Nortel's Enterprise Solutions suffered a 30 percent year-over-year decline, dropping in revenue to $535 million. In the first quarter of 2009, its enterprise business generated just $395 million in revenue, which was down about 41 percent from the year before, a massive slide from the $806 million in enterprise solutions revenue Nortel recorded in the fourth quarter of 2006.

Analyst firm Oppenheimer & Co. said in a research note that Avaya's acquiring Nortel's enterprise business would be a boon and would make Avaya a stronger player in the market and "a top four" player in Layer 2 through 3 Internet switching. The acquisition would also make Avaya "the largest VoIP player with roughly 25 percent market share," Oppenheimer analyst Ittai Kidron wrote.