Nortel: Who's Going to Buy MEN?

So, it’s been a week since Nortel (NT) unveiled plans to dump MEN - aka Metro Ethernet Network.

It’s a $1.5-billion/year business, growing at 10%/year that could easily see even better growth if it was de-Nortelized.

So, who’s going to step in at a time when economic conditions are volatile, large customers are showing some skittishness and competition remains fierce?

An interesting suggestion from the comment-sphere is a private equity buy-out. One possibility is Charlie Giancarlo, who used to be an executive VP and chief development officer with Cisco (CSCO) before leaving to join SilverLake Partners, which acquired Avaya.

In terms of industry players, the potential list of suitors could include Ericsson (ERIC) and Huawei, which desperately wants a foothold in the U.S.

Of course, the key consideration is how much Nortel can get for MEN. Paradigm analyst Barry Richards suggests it’s worth $2-billion, while other analysts suggest $1-billion.

If Nortel can get $2-billion, MEN is as good as gone. If MEN goes wanting, then it’s entirely possible Nortel may have keep it.

Update: According to the Globe & Mail, Nortel’s on a “fast-track” to sell MEN:

We’re on to a fast track process,” Philippe Morin, president of Nortel’s MEN unit, told the Report on Business. “Making it public, one of the benefits of this, [is] we’ve actually now had people raising their hands interested, which we’d not thought of [before]. We’re getting more interest. But the sooner we can do this, the better for both the employees and our [customer] base.

Comments

[htroute66:]

Yeah....sure......sell the only thing that is actually making a profit! No need to wonder why most of the companies are going broke! With CEOs and ANALysts like this....who needs Wall Street! Let's just bail the assholes out and let them take the rest of our money!

2008 Sep 25 08:57 AM

[longoil:]

Nortel's short term thinking (e.g. selling MEN for quick cash) clearly demonstrates the bad management of Morin and Zafirovsky.

Morin escalated through the ranks of management quickly only because his father (Yves Morin) is a senator in the Canadian senate connected with many Nortel executives, certainly not because of his management skills.

Zafirovsky's incompetence in managing Nortel explains why Motorola did not want to promote him as their CEO.

Contrast this with Cisco who had the same CEO (John Chambers) for the last 20 yrs. Nortel has had 7 or 8 CEO (most of them bad, with the exception of Jean Monty) during the same period.

During the high tech days, Nortel was spending billions on stupid acquisitions and wound up selling most at 10% of the original cost.
Contrast this with Cisco who saved billions for a rainy day during that time.

Nortel is definitely a short.

2008 Sep 25 09:50 AM