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11:28 AM

Avaya Wins Nortel Unit With $900 Million Bid

Nortel's enterprise unit provides landline phone systems to customers on a worldwide basis.

Avaya Inc. has won the auction to acquire Nortel Networks' Enterprise Solutions unit and some associated operations, but the firm had to boost its bid from $475 million to $900 to capture the Nortel assets.

Avaya staved off a last minute offer from Siemens Enterprise Communication and its private equity partner, Gores Group LLC. The enterprise unit provides landline phone systems to customers on a worldwide basis. In July, Avaya had submitted a $475 million stalking horse offer for the assets and last week that bid was challenged by an undisclosed suitor, which turned out to be the Siemens-Gores offer. The enterprise operation recorded revenues of $2.4 billion in 2008.

Nortel, which has been mired in bankruptcy proceedings since January, said approval for the assets takeover will be sought Tuesday at a joint hearing involving U.S. and Canadian government regulatory agencies. The deal was hailed by Nortel's Joel Hackney, who is president of Nortel Enterprise Solutions.

"As we work through integration planning, it is business as usual, and we will continue to focus on supporting our installed base," Hackney said in a statement. "We will ensure our customers can fully leverage their existing Nortel investment as they benefit from the complementary capabilities of the Nortel and the Avaya portfolio of products and services."

The acquisition was hailed by officials from the International Nortel Networks Users Association (INNUA.) Nortel noted also that the transaction calls for Avaya to provide an additional pool of $15 million for an employee retention program.

Verizon Communications has sought to intervene in the takeover proceedings. Verizon has charged that Avaya is threatening to drop maintenance of some Nortel security gear after the takeover .

In an earlier auction, Ericsson placed what appears to be a winning bid of $1.3 billion for Nortel's CDMA/LTE wireless operation. BlackBerry provider Research In Motion -- like Nortel, headquartered in Ontario -- has protested the Ericsson bid.

Nortel's Metro Ethernet business is still waiting to be auctioned and potential bidders have been examining the operation preparing to make bids.

InformationWeek Analytics has published an analysis of the current state of service assurance. Download the report here (registration required).

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