Why Ericsson's Nortel Deal Won't Happen

It’ll be a few weeks, maybe even months, before every last word is said on the topic of Ericsson’s (ERIC) bid for Nortel’s LTE and CDMA business. But I’ve had an epiphany; the deal isn’t going to happen. For the same reason that ATK / MDA wasn’t approved (see prior post “Prentice is right to reject MDA space deal” April 10-08). No net benefit to Canada; at least not that anyone has seen so far.

After Inco, Falconbridge, Labatt, Molson, Sleeman, ATI, Dofasco, Corel, Cognos, Westcoast Energy, etc., etc., the nation has had enough. Some of these firms matter to the country’s economic future, while others did not. We’re all for a free market, and we’ve lived and died by the sword of Free Trade for the past 20 years. But strategic assets are just that.

Whether the resources be IP or beneath the soil. They’re worth thinking carefully about; ’cause once they’re gone, they’re gone.

I think Nortel’s crown jewels matter. As Minister Clement is learning on the Stelco file, it’s very hard to unscramble the egg once control and ownership have left domestic hands.

In the case of Nortel’s CDMA and LTE intellectual property; let’s not tempt fate.

Comments

[User 462817:]

the problem here is management. because they can't do the job, they think the only solution is the breakup of the company. if you have an employee that don't have the capacity, you take someone else. it's time for those so called managers to understand that if they can't deliver than it's time for them to leave and stop finding excuses for their weaknesses. they should have the decency to call a general meeting of the share holders and explain why they can't do it and face the consequences.

Jul 29 08:07 AM

[barryfo:]

Nortel has been going down hill for around 10 years and has been in bankruptcy protection for 6+ months. If the government was serious they would have stepped in before now. How about when Nortel asked for help??? This is pure politics.

The other thing to note is that this deal with Ericsson DOES NOT include LTE patents. That is the important IP, CDMA is considered legacy and not important from a technology perspective (Qualcomm has most the patents on CDMA anyway).

I expect to see RIM buy the LTE patents from Nortel and everybody will be happy again.

The biggest issue is that if Nortel's R&D people are lost...no more IP in the future. This is the biggest loss.

Jul 29 08:34 AM

[PJ Louis:]

In the past I would have agreed with you that the national government would not let its premier think tank and vendor fall into foreign hands. However, there is precedence for such a move.

When Lucent was acquired by Alcatel, the U.S. government and industry professionals (including myself) cried out about Bell Laboratories ending up in the hands of foreign ownership. Bell Labs was the United States’ top telecom think tank and we were going to let it fall into French control. For many professionals there were issues of intellectual property control and national security that had to be dealt with. Concerns regarding Bell Labs’ U.S. government work were eventually dealt with by Alcatel when it promised to build a firewall between Bell Labs and the rest of Alcatel Lucent. The result was Alcatel forming a separate company, which is now called LGS (Lucent and Alcatel Government Solutions). LGS now has operating control of Bell Labs. Effectively, LGS acts as a kind of firewall for sensitive U.S. government telecom work. However, Bell Labs no longer does basic research and sets defacto national standards; it now just performs marketable technology work. How valuable can their work be now? So who knows what the Canadian government will do.

Nortel’s Bell Northern Research (the U.S equivalent of Bell Labs) no longer exists as a separate entity and it has not since the late 1990s. Bell Northern Research (BNR) was a top notch telecom R&D group. In my opinion. after John Roth merged BNR into Nortel R&D, BNR ceased being a force in the industry.

Will the Canadian government allow their premier telecom vendor to disappear from Canadian hands? I don’t have an answer to that question. But there are so many creditors and bond holders involved in Nortel that many influential people in the financial market may have significant influence over the final outcome. I do agree there will be a national discussion about this sale. The question is whether the discussion will have any impact on the final outcome. I have commented on this issue on Canadian news blogs, the replies run the gamut of views.

Jul 29 09:22 AM