Justice Sirikah

Nortel Networks Corporation (OTCBB: NRTLQ) Shares Continue to Wilt at the Back of Assets’ Auction

by Justice Sirikah November 23, 2009
nrtlq_logo.jpg  The stock price of Nortel Networks Corporation (OTCBB: NRTLQ, or NRTLQ.ob) rested fallen from grace on Monday, shedding off 5 percent to close the trading session at a paltry $0.0475 as the Canadian communications technology company disclosed that Ciena Corporation (NASDAQ: CIEN) had won a bid to assume a domineering shareholding of all its global Optical Networking and Carrier Ethernet ventures.

  Since January’s bankruptcy filing, primarily as a result of the ruthless economic downturn, Nortel has taken to cut back expenditures in order to become financially stable. In this regard the company gave up the underperforming CDMA and LTE R&D sections to Ericsson for $650 million, sold its Enterprise unit for $900 million to Avaya, and at this point in time it is considering putting up its Global System for Mobile Communications (GSM) business up for sale. Finer details on GSM are set for release before the end of this week.

  In the most recent bid to prevent a further nosedive of fortunes at Nortel, Ciena pipped Nokia Siemens Networks in a riveting contest by adding $248 million on the initial stalking-horse offer that it made in October, taking the final purchase price to the tune of $769 million. The deal is widely expected to shift the balance of power to Ciena’s favour as it will move to number three, from number 10 in terms of the market share for carrier Ethernet equipment. The three-day auction marked a second time on the trot that Nokia Siemens has lost out on bidding for Nortel’s assets.

   “With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse with the scale to challenge the industry status quo and offer customers a practical path for transitioning to automated, optical Ethernet- based networking”, commented Gary Smith, Ciena’s president and CEO.

  Under the terms of the transaction, $530 million will be paid in cash and $239 million in convertible notes, payable by June 2017. In addition, Ciena is obligated to integrate at least 2,000 of Nortel’s employees in its structures. Both parties are looking forward to close the deal by the first quarter of next year subsequent to regulatory approvals in the U.S and Canada. Meanwhile, the process of assimilating Nortel’s assets is anticipated to cost Ciena more or less than $180 million.

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