Nortel Assets on Radware's Radar: Report

Tel Aviv-based Radware is reportedly ready to spend between $30 million and $50 million to acquire all or part of Nortel's metro Ethernet networks business.
Publish date:

Updated from 2:48 p.m. EST

Network specialist


(RDWR) - Get Report

is poised to buy part of troubled telecom equipment giant

Nortel Networks


, according to a report on Israeli tech news Web site



Citing unnamed sources,


reports that Tel Aviv-based Radware will spend between $30 million and $50 million to acquire all or part of Nortel's metro Ethernet networks business.

Nortel declined to comment on the Radware report.

Canada-based Nortel, keen to streamline its business and boost its flagging share price after wrestling with

plummeting sales

of its wireless gear, announced plans to


its metro Ethernet networks business in September.

A quick sale of Nortel assets could benefit the company's beleaguered stock, which took a severe beating toward the end of 2008. Nortel even received a

stern ultimatum

last month: Boost share price or get booted from the NYSE.

Nortel's shares closed Thursday's trading session up 3.6% at 29 cents, well below their 52-week high of $13.71.

The telecom equipment specialist, which competes with

Cisco Systems

(CSCO) - Get Report




, posted

a $3.4 billion loss

in its

recent third-quarter results

. Nortel's 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.

Firms such as





Nokia Siemens

(NOK) - Get Report



and Cisco have already been cited as


bidders for Nortel's metro Ethernet business. The Toronto

Globe and Mail

recently reported that the firm has received three separate offers that are worth close to $1 billion, although Nortel has not yet confirmed this.

Given the $1 billion figure, however, it seems unlikely that Radware would walk away with a huge chunk of Nortel's assets for just $50 million.

"I really think that it's most likely a product line that Radware are trying to purchase within the

Nortel Metro Ethernet Group," said Catharine Trebnick, senior research analyst at Avian Securities.

It has also been suggested that the $1 billion price tag for Nortel's metro Ethernet network business may be wide of the mark. Analyst firm


, for example, estimates that the firm's metro Ethernet division is worth $750 million, although


recently warned that that the firm may have to accept a lower bid of around $500 million.

"We now believe Nortel either will not be able to sell the business in this current environment, or have to accept a materially lower offer," wrote UBS analyst Nikos Theodosopoulos, in a note.

Radware, which is facing challenges of its own, may be on the lookout for a bargain. The firm posted widening losses in its recent third-quarter results and has vowed to return to profitability by the end of its fiscal fourth quarter.

The network specialist has also thrown its weight behind an "on demand" strategy, which aims to provide pay-as-you-grow technologies to enterprises and telecom firms.

Radware refused to be drawn on its M&A plans when contacted by

Thursday. "We don't comment on rumors," was the terse response from a spokeswoman at the company's U.S. headquarters in Mahwah, N.J.

Telecom companies use Nortel's metro Ethernet products to deliver Internet services to consumers and businesses, although the

Globe and Mail

has claimed 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

Radware shares retreated with the broader market Thursday, slipping 21 cents, or 3.63%, to $5.57.