Siemens’ Failed Pursuit of Nortel’s Enterprise Business

After the recent auction of Nortel’s (NRTLQ.PK) enterprise business was said and done, Siemens Communications (SI) lost by a measly $15-million – and the fact that its bid consisted of $700-million in cash and and IOU, while Avaya (AV) offered all cash.

But Siemens’ failure to win the auction was the last of many attempts it made to buy the enterprise business. According to an article in the Globe & Mail, Siemens approached Nortel last year about buying the business to create a $5-billion enterprise entity with strong footholds in Europe and North America.

“We wanted to take Nortel’s North American market leadership and Siemens leadership in Europe, and create a world beater in the field, based in Toronto, that would take the fight to Avaya,” a source told the G&M.

A deal, however, failed to happen but Nortel and Siemens started talking again in January after Nortel filed for bankruptcy protection. It looked a deal was gaining traction when the Ontario government agreed to provide a $75-million grant, while Export Development Canada considered making a $300-million loan.

According to sources cited by the G&M, the deal hit the skids when EDC pulled its loan offer after RIM co-CEO Jim Balsillie raised a political stink in July by claiming RIM had been shut out of the bidding for Nortel’s CDMA business and LTE R&D unit.

While Siemens decided at the end of the day it wasn’t willing to bid higher than the premium price that Avaya was willing to pay, the one question that begs to be answered if why Siemens didn’t make a higher “stalking horse” bid than Avaya if had been so interested in the enterprise business for such a long time?

Not that a higher “stalking horse” bid would have made a difference at the end of the day, but it appears that Siemens may have been outmaneuvered by Avaya.