Nokia deal launches Nortel's liquidation sale

A deal to sell two Nortel wireless divisions to Nokia Siemens Networks is just the beginning of a complete sell-off of assets,Nortel's senior executive in Ottawa confirmed Monday.

At least one analyst said the liquidationsale signals the sad end of a company that once represented Canada's high-tech might.

"We will be selling all remaining businesses," Samih Elhage, president of Nortel Networks Corp.'scarrierVoIP and application solutions division. "There is a process in place to allow us to achieve this objective as soon as possible."

He added that the goal is to maximize the company's value to all stakeholders, including creditors, and protect jobs as well as the company's technology and innovations.

Elhage was affirmingwhat Nortel presidentMike Zafirovski indicated afterhis companyand Espoo, Finland-based Nokia SiemensNetworks announced late Friday that Nokia Siemens has agreed to buyNortel'sprofitable CDMA division and its LTE (Long Term Evolution)Access divisionfor $650 million US.

The two divisions make up about 10 per cent of Nortel.

Nortel's piece-by-piece sale represents a complete change ofplans from earlier this year, when Zafirovskihe wanted to restructure and preservethe telecommunicationsgiantas a stand-alone company.

TylerChamberlin, an assistant professor who researches the technology industry at the University of Ottawa's Telfer School of Management, said things seem to be over for a former "great Canadian institution."

"It's a very, very sad day for just about everybody in and around this company," he said Monday,"and a sad day for the country, too. Because despite the challenges of recent years, this was an industry darling and it was our real technology player."

Chamberlin said he thinks Nortelcould have survived with some government assistance, as its debt loadwas not that bad, in light ofrevenues of $10 billion last year.

He is now concerned about the loss of thesignificant role that the company played in research and development in Canada.

"But it doesn't seem like the federal government in power either appreciated or were adequately motivated to do something about that."

Chamberlin said that leaves a gapother technology companies such as BlackBerry maker Research In Motion Ltd. haven't filled.

Nortel and Nokia Siemenshad been in negotiations since Nortelfiled forbankruptcy protection in January, Nokia Siemens executives confirmed Monday at a media conference call.

TSE suspends trading of Nortel stock

The deal prompted the Toronto Stock Exchange to suspend trading of Nortel shares Monday morning.

Nortel and Nokia Siemenshad said Fridaythat2,500 Nortel employees, mostlyin North America, would be transferred to Nokia under the deal.

Nokia Siemens executivessaid Monday that abouta third of those employees are in Canada. The bulk are in Ottawa, where the company has a large campus at which it conducts most of its R&D, but some are alsoin Toronto, where its corporate headquarters is located.

In Ottawa, about 1,000employees workon CDMA and LTE, Elhage said.More than half the employees arepart of the deal, which does not include Nortel's LTE Core division.

"We really do believe this is the best possible outcome for Canada, for Nortel's wireless customers, and for the associated employees," said Simon Beresford-Wylie, CEOof Nokia Siemens.

"We believe here passionately that this will keep Canada at the forefront of next-generation wireless research and development and importantly maintain jobs in this area."

Meanwhile, he added, the deal represents "great value" for his own company, strengtheningits place in the North American marketplace and boosting its own LTE division.It will also provide stability for Nortel's customers, as Nokia Siemens will be taking over their contracts, Beresford-Wylie said.

Those customers include Bell,SaskTel and U.S. Cellular.

Some job cuts possible

Michael Matthews, head of business and strategic development for Nokia Siemens, said the North American employees being transferred to his company represent "a significant majority, if not most, of the people" in Canada and the U.S. working for Nortel units being purchased. That suggests there may be some staff cuts.

However,Matthewsalsosuggested that the LTE division, based largely in Ottawa, has the potential to grow in the future.

About 400 of the current employees affected in the deal are involved inresearch and developmentonLTE next-generation wireless technology.

Employees transferredfrom Nortelwill have their years of service count toward their eligibility for benefits under terms and conditions offered by Nokia Siemens. However, the company said it will nottake on existing benefits and pensions, which are expected to be settled by Nortel withits creditors.

Nokia Siemens's financing for the deal includes a $300-million loan commitment fromExport Development Canada (EDC), Canada's government-owned export credit agency.

Nortel's Elhage said the EDC has specified that Nokia Siemens must commit to maintaining CDMA and EDC "centres of excellence" in Ottawato receive the money.

Luca Maestri, chief financial officer of Nokia Siemens, said the EDC money was important during the current credit crunch, but not crucial to the deal. Nor were Canada's researchfunding or tax regimes a major incentive.

"I would say thatour decision to hire people in Canada was based on their skill set and their capabilities and very much based on the product and the knowledge that is in Canada," he said. "It wasn't based on tax reasons or any types of subsidies."

Because ofNortel's bankruptcy protection filing, the deal must still be approved bytheU.S.Bankruptcy Court and the Ontario Superior Court of Justice, which will hold the necessary hearings by July 30. The deal is expected to close in the third quarter of 2009.

Employees hope for stability

On Monday morning, many of the employees arriving for work at the Carling Avenue campus in Ottawa said the deal was welcome news.

"I'm kind of having a wait-and-see attitude," said one Nortel employee who works in the CDMA area of the wireless unit that is being sold.

He said he didn't want his name used, buthe hopes the sale will mean more security and stability in his division.

"It seems like it's a good idea," he said. "I'm hoping it's a good idea."

Mika Vehvilainen,chief operating officer of Nokia Siemens Networks, posted a video on his company's website to welcome and reassure Nortel workers.

"Hopefully, all of you will join us and help us expand our presence in North America where we have some terrific people and great customers, but where we also want to become much bigger and much stronger."

Thomas Timlin, who works in the enterprise unit at Nortel and has been with the company for nine years, said he's not worried about Nortel's workers because their skills will always be in high demand.

'I think we'll be successful'

"You can always be worried about your jobs, but I think the people of Nortel will always compete against other employees in other companies. I think we have a good base of skill sets at Nortel and I think we'll be successful."

In terms of Nortel's future, Timlin said, he thought the sale of the wireless unit was the right thing to do.

"I think it's great. I think it's movement forward for the company. It might stimulate other businesses being sold quicker," he said.

In Nortel's media release, the company saidit is still "advancing in its discussions with external parties to sell its other businesses."

If those sales aren't possible, it said, the company will have to restructure.

Shawn Duval, who has worked at Nortel for 12 years and for five years in the wireless division, said that he's glad the deal will save some employees from being tied to the fate of the former communications giant.

Despite employees' upbeat reaction to the news, the University of Ottawa's Chamberlin said the deal and Nortel's move to sell off assets isn't a good thing for employees.

"It means that the situation gets much worse," he said. "At least previously there was a hope that things were going to change or things were going to improve."