Nortel Gets $1B Bids for Ethernet Biz: Report

Beleaguered telecom equipment maker Nortel Networks(NT) has received offers worth close to $1 billion for the sale of some of its key assets, according to a news report in the Toronto Globe & Mail.

The Canadian firm, which has been wrestling with plummeting sales of its wireless gear, announced plans to divest its metro Ethernet networks business in September.

Telecom companies use Nortel's metro Ethernet products to deliver Internet services to consumers and businesses, and the sale aims to boost Nortel's flagging stock, which received a stern ultimatum this month: Boost share price or get booted from the NYSE.

In midday trading Wednesday, Nortel's stock slipped 2 cents, or 6.9%, to 27 cents, as the Nasdaq dipped 0.09%.

According to The Globe & Mail, Nortel has received three separate offers that are close to $1 billion, though the company declined to comment when contacted by TheStreet.com Wednesday.

One analyst thinks that any number of firms could be Nortel suitors.

"The most likely bidders for Nortel's assets are Ericsson, Huawei, Nokia Siemens, and Cisco Systems(CSCO)," wrote Avi Cohen, managing partner at analyst firm Avian Securities, in a note Tuesday. "We believe Alcatel-Lucent(ALU) and Motorola(MOT) are less likely bidders because they are struggling with their own challenges and would have a hard time financing such a purchase."

The Globe and Mail report claims that Nortel is also considering selling off more than its metro Ethernet unit. The company is mulling the sale of its carrier networks division and even its enterprise business, it said.

Cohen has heard that China's Huawei would like to bid on the entire company, although Committee on Foreign Investment in the U.S. (CFIUS) regulations could prohibit this. The analyst adds that Ericsson would be the most likely suitor for Nortel's carrier business, as the acquisition would expand its reach in radio communication technologies.

In his note, Cohen explained that the telecom sector is changing rapidly, as exemplified by the Alcatel-Lucent, and Nokia(NOK)-Siemens(SI) mergers. Telecom firms are also feeling the effects of the recession, he added.

"Over the next two years we expect conditions to remain very tough, both competitively and because of the current economic/financing malaise," he wrote. "Nortel's struggles and possible dissolution [represent] just another step in this rationalization in light of carrier consolidation and depressed CapEx spending.

Nortel, which competes with Cisco and Motorola, posted a $3.4 billion loss in its recent third-quarter results. Revenue fell 14% to $2.32 billion, and the company said it plans to cut 1,300 jobs in an attempt to boost its business.

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