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Nortel confirms division sale talks

Mike Zafirovski, Nortel Networks’ chief executive, confirmed that the Canadian telecommunications equipment maker operating under Chapter 11 bankruptcy protection, is in negotiations over the possible sale of some or all of its business units.

“Discussions are taking place with various external parties,” he said, “however decisions have not been taken and we continue to evaluate our restructuring alternatives.”

Mr Zafirovski, speaking after the company reported a first quarter loss of $507m or $1.02 a share on revenues that fell by 37 per cent to $1.73bn, said there had been “lots of interest” in the Nortel assets that have been offered for sale.

The company has yet to reveal the identity of any of the bidders for its assets, however sources close to the discussions have confirmed that Nokia Siemens has made an offer for the core carrier networks business and that Nortel has hired Goldman Sachs to find a buyer for its controlling stake in LG-Nortel, the telecommunications equipment maker in which South Korea’s LG Electronics is the other partner.

Nortel, once the flagship carrier for the Canadian technology sector, filed for bankruptcy protection in mid-January, citing the economic crisis for derailing a turnaround effort that began in 2005.

Since then, there has been widespread speculation that the company may be sold off in pieces rather than emerge from bankruptcy protection as a viable stand-alone entity. In the clearest statement to date on the issue, Mr Zafirovski said that if selling off units made the most sense, “we are not opposed to mergers or being acquired.”

Mr Zafirovski said that preserving the Nortel name “is not the main driving force” in the continuing discussions over whether to sell or retain individual business units and said he is being “very realistic” about the options. He also noted that the company has undertaken an internal reoganisation and is now organized into four main standalone business units giving it more flexibility as it decides which divisions to sell or keep.

The Nortel chief executive added that improvements in some of the company’s most closely watched metrics including customer service levels and an $80m increase in its cash balances to $2.48bn at the end of the first quarter, had bought the company a little more time to prepare its reoganisation plan.

“We are moving with speed rather than haste,” he said. Last month, Nortel won a three-month extension for the bankruptcy protection and now has until July 30 to work out a recovery plan.

While the 37 per cent decline in first quarter revenues was a disappointment, Mr Zafirofski said the decline reflected a number of factors including the Chapter 11 filing which probably reduced revenues by about 15 per cent, but said he was cautiously optimistic that the worst was behind the company.

“First quarter results showed a decline in revenue and margins as expected due to the severe economic downturn and our filings for creditor protection. However, despite the declines we saw this quarter, revenue has stabilized and our cash balance is stable from year-end 2008.”

He added, “We accomplished our initial objectives of maintaining our customer commitments and strengthening our operational performance. Network performance and customer service levels are at multi-year highs and customers are expressing their support of Nortel.”

Nortel has struggled with slumping sales as telecommunications network operators such as Sprint Nextel, the third largest US carrier, and enterprise customers have cut back or postponed capital equipment purchases.

Sales in the carrier networks division fell by 32 per cent to $737m in the latest quarter while the enterprise solutions business, which supplies companies, had a 41 per cent drop in revenue to $395m.

Источник: Financial Times

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