Nortel agreed to sell its Enterprise Solutions group to Avaya for US$475 million, barring any better offers from other potential bidders under the "stalking horse" arrangement. Nortel's enterprise chief Joel Hackney shared a few thoughts about the deal and its implications.
What are your initial thoughts on "stalking horse" deal with Avaya?
It provides clarity to our employees and customer base in terms of our strategic intent to take advantage of [industry] consolidation.
When does the bidding take place?
We expect those bidding procedures to be filed and approved by the court within the next seven to 10 days. Once that happens, that's when the process will happen. We don't have a precise date but you'd be looking at the first or second week of August.
How did you go about establishing a price for the enterprise business?
Looking at the total value, one of the things that's unique during this process -- an asset sale agreement -- is capturing the full value of a business and a headline price is very difficult to do because many of the value levers are defined by the terms and conditions of the deal. It's nearly impossible to explain all the terms and conditions and how it all gets quantified and articulated, but it's a combination of looking at what we think the value of the business is for us if we hold it vs. the value of partnering with another bidder.
What's the reaction been among the customers you've spoken with?
It has been positive up until this point. The view is consolidation is important. They want healthy suppliers. Relevance in the industry is important. Putting the company on solid footing is well received. We have continued progress in the Nortel enterprise business -- we grew second quarter revenues vs. first quarter, double digit. We improved profitability in the second quarter vs. the first quarter. According to market share companies, we actually grew market share in voice in North America in the first quarter. We believe we have very good momentum in a very tough market and obviously Avaya sees significant value and capabilities that can add to their business going forward.
Are customers encouraged about Avaya or are they concerned about future product directions?
Avaya's purchasing Nortel [Enterprise Solutions] because of the asset it represents. The most powerful asset Nortel has is its customer base. So the whole approach is to support, maintain and expand upon that installed base and that's every discussion I've had with Avaya and I know that's their intention.