Remember the last time you played Monopoly (TM) when a big player in the game who owned Boardwalk and Park Place went bankrupt, and how you and your friends couldn't wait to buy these nice assets for dimes on the dollars?
That's what may be in the process of occurring to Nortel right now. The Wall Street Journal (WSJ) reports that the communications firm, which is under creditor protection, has attracted several possible purchasers of its high-value enterprise and wireless equipment businesses.
According to The Canadian Press, the WSJ's website named Avaya and Siemens Enterprise Communications as potential purchasers of Nortel's enterprise product line according to well-placed sources. Cisco looked at the unit as well but is not expected to bid. Nortel is also is in talks to sell its wireless voice equipment division to firms such as Nokia Siemens Networks. Nokia Siemens Networks, which long has sought to expand its presence in the U.S.
The dilemma faced by Nortel, which is under creditor protection, is that by selling its most valuable units, which posted $6.7 billion in sales last year, is what it has left worth continuing in business for?
``'What we are finding is that there may be a lot more value by selling rather than emerging,'' said an unnamed source quoted by the paper. ``'The company was surprised by the amount of interest and the number of calls.''
``Selling the wireless gear business, which generates most of the company's cash, would complicate any plans to emerge from the bankruptcy process as a stand-alone company.'''
Appropriately enough the WSJ story comes on the heels of Nortel's latest financial results, released last week. The firm reported a $2.1 billion net loss in the fourth quarter 2008 (4Q 08) compared $3.4 billion in 3Q 08. This improvement lies in the shadow of a net loss of $5.78 billion for 2008 compared to that of $957 million for 2007.
4Q 08 revenues were up to $2.72 billion from $2.32 billion in 3Q 08, but down 15 percent from $3.2 billion in 4Q 07. Full year 2008 revenues of $10.42 billion represent a 5 percent decrease compared to that in 2007. A portion of that revenue growth came from contract completion and with this realization of previously deferred revenues rather than from sales.
Nortel's orders paint a similar picture. They were $2.64 billion for 4Q 08, up from $2.02 billion in 3Q 08 but down from $3.24 billion for 4Q 07. It cited lower orders for wireless and enterprise equipment for the drop between 2007 and 2008.
The firm is still hoping to pull itself up without breaking apart but that prospect appears to be less likely. The Globe and Mail reports that debtor-in-possession financing -- the lifeblood of most bankruptcy restructurings -- has all but disappeared this year.
"'Banks aren't exactly lining up to finance a purchase of Nortel assets,'" a banking source told the newspaper.
TMCnet has been tracking this story. Watch our space for more developments.
