Nortel sells business unit to Avaya for US$475 million

TORONTO -

Nortel Networks Corp. has reached an agreement to sell off most of its Enterprise Solutions unit, in a deal that will potentially see a key chunk of its remaining business go to Avaya Inc. for US$475 million.

The Enterprise unit supplies phone systems and other communications equipment to businesses and large organizations around the world, and had remained one of the biggest parts of the business that hadn't found a buyer.

"We have determined that the sale of our businesses maximizes value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible," said Nortel president and CEO Mike Zafirovski in a release.

"If successfully completed, this transaction will provide clarity on the path forward for our enterprise customers, partners and employees, and enable the industry to continue to benefit from Nortel-created technology, know-how and leading-edge innovation."

Avaya has been a rival of Nortel in that business and has long been considered a leading contender to buy the Toronto-based company's Enterprise unit, which sells critical communication systems to the IT departments of companies and public-sector organizations.

"This is a strategic opportunity to acquire talent and complementary assets that position the combined company for growth and success," said president and chief executive Kevin Kennedy.

"We are committed to protecting the communications investments of the customers of Avaya and Nortel, and to effectively executing the integration of Nortel Enterprise Solutions and Avaya."

Nortel has been operating under court protection from its creditors since January.

It describes the offer from Avaya as a "stalking horse" agreement, suggesting Nortel hopes to use it to prompt other potential bidders to strike a better deal.

Nortel had originally intended to reorganize as a smaller independent business but more recently it has been selling all of its major assets.

The International Nortel Networks Users Association, which represents more than 4,000 Nortel customers around the world, said it supports the agreement.

"The strength of the enterprise solutions portfolio has never been in question, and the Avaya acquisition could enable a more effective go-to-market strategy for these solutions and strengthen the market position of the company," it said in a release.