Motorola, Nortel Discuss Merger Of Wireless Units - InformationWeek

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Motorola, Nortel Discuss Merger Of Wireless Units

Reports say the two companies have been talking for a month about combining Motorola's Home and Networks Mobility Division and Nortel's wireless infrastructure operations.

A merger of the infrastructure units of Motorola and Nortel Networks would likely return Nortel chief executive Mike Zafirovski to overseeing Motorola units that he once managed as president and COO of Motorola.

The Wall Street Journal reported Monday that the two companies have been talking for approximately a month about combining Motorola's Home and Networks Mobility Division and Nortel's wireless infrastructure operations. The combined unit under discussion -- to be led by Nortel -- would have about $10 billion in sales, but would not include Motorola's mobile handset unit, which the company also is interested in spinning off.

Zafirovski, often called "Mike Z" by colleagues, led a turnaround of Motorola's chronically troubled handset businesses earlier in the decade, although the overall effort also resulted in 50,000 job losses at Motorola.

In recent days, Motorola's new chief executive, Greg Brown, has floated a trial balloon about selling or spinning off the company's handset unit, which accounts for about half of Motorola's $36 billion in annual revenue. For more than a year now, Motorola has been under siege by financier Carl Icahn, who has been calling for a breakup of Motorola. Earlier in the decade, Motorola spun off its Freescale Semiconductor operation.

Both Motorola and Nortel have been caught in the downsizing agonies of the entire wireless infrastructure business. On Friday, Alcatel-Lucent reported a whopping loss of $3.7 billion -- and a significant portion of that was attributed to its CDMA cellular infrastructure business.

The Wall Street Journal said the proposed Motorola-Nortel unit would include CDMA, GSM, and iDEN cellular infrastructure technologies. European-developed GSM accounts for the great majority of the world's wireless subscribers. In the United States, AT&T and T-Mobile use GSM, while Verizon Wireless is the leading user of CDMA. The iDEN infrastructure network, long an exclusive fiefdom of Motorola, is used by Nextel users; Sprint Nextel has been challenged to move iDEN customers to Sprint's CDMA service. In general, wireless service providers are moving to more advanced technologies such as Long Term Evolution, and their anticipated moves are causing infrastructure providers to review the value of their product portfolios.

There would be a certain poetic justice for Zafirovski in a return to the combined Nortel-Motorola unit being discussed. After he was passed over for the top position at Motorola by Ed Zander, his former employer sued him and required him to return millions of dollars in severance pay to Motorola when he moved to Nortel.

In a humorous comment at the time, incoming Motorola chief Zander said he would try to keep Zafirovski in the Motorola fold. "We'll go to charm school together," said Zander, who noted he was joining Chicago-based Motorola from California. "We'll sit in the hot tub together."

Now it's Zander who is on his way out of Motorola while Zafirovski appears to be returning to head up some Motorola units.

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