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August 13, 2009

Is Nortel's Voice-Apps Line Next on the Block?

By Brendan B. Read, Senior Contributing Editor

Nortel’s (News - Alert) voice applications unit, which makes voice (including IP), video, and multimedia via solutions such as the Application Server and Communications Server offerings, is next on the chopping block.

The Financial Post, citing Samih Elhage, the executive responsible for the operation, said a tentative deal for his division could come soon via a stalking-horse bid akin to that by Ericsson (News - Alert) and Avaya for Nortel’s wireless and enterprise divisions.
The likely potential bidders are Alcatel-Lucent, Ericsson [which won the wireless unit for $1.13 billion], Huawei, Nokia (News - Alert) Siemens Networks, and Sonus Systems, which he said are the Nortel unit’s competitors.
Elhage said the voice application division is generating sales at annual rate of $800-million and is profitable on an operational basis. While sales are down from about $900-million in 2008, he said the Nortel operation is still first in the global market with a 16 percent market share. The division continues to win major contracts in Britain, Australia and Austria despite the depressing effect of operating under bankruptcy protection.
The operation is supported by 2,500 employees with about 800 each in Ottawa, Ont. and Raleigh, N.C., a significant group in Europe, and the rest scattered around the world.
"We are very close to getting a stalking-horse [first-offer] bid, which will provide clarity on the situation," he said.
The reports of the pending sale comes a month after Nortel announced that it is releasing this fall enhancements to its Communications Server 1500 (CS 1500) aimed at deliver leading technologies to regional and rural local exchange carriers.

The CS 1500 leverages remote upgrades and introduces new billing, operations, administration, and maintenance capabilities. It offers a single broadband connection with both voice and data traffic to SMBs with on-site PBXes and to deliver IP-powered applications like unified messaging, click-to-call, single-number service and end user Web portals. There have been core infrastructure upgrades which help carriers decrease costs and improve time-to-market.

“Nortel has long recognized the need for carriers of all shapes and sizes to find a cost-effective way to offer advanced voice and multimedia services to business and residential subscribers,” said Elhage at the time. “The new CS 1500 product enhancements demonstrate our continued commitment to delivering consistent, reliable and high-quality business voice and multimedia solutions to carriers across the globe.”
The questions that remains are which nameplate will be on the new CS 1500s, and on other division products like the BCM 450 when they begin shipping, and from where.

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