Private equity firm MatlinPatterson has raised the stakes for Nortel's CDMA and LTE infrastructure division with its $725 million bid, but Nokia Siemens Networks (NSN) is likely to raise its original bid to hold on to the Nortel telecom assets when the auction occurs Friday.
Already, though, such a MatlinPatterson win seems unlikely, as NSN's North American president Sue Spradley has indicated that the company is willing to up the ante, if need be, to keep its offer firmly on the table, according to the Financial Post.
Some observers are surprised that MatlinPatterson, which already owns part of Nortel, was the only company to step forward and compete with NSN for the bankrupt telecom giant's assets. Alcatel-Lucent and Ericsson apparently declined to make a bid, while BlackBerry manufacturer Research In Motion (RIM) made an offer but claims it was unfairly barred from the bidding process.
Akshay Sharma, research director at Gartner, said Alcatel-Lucent and Ericsson would have benefited from an acquisition of Nortel's CDMA and LTE business, and it would have been particularly attractive to them if NSN's bid was, indeed, a low-ball offer.
RIM, meanwhile, has largely stayed out of the network infrastructure game except for its centralized Network Operations Center (NOC), which has helped it achieve the mobile email dominance that has become the BlackBerry trademark.
"RIM is extremely disappointed that Nortel's world-leading technology, the development of which has been funded in part by Canadian taxpayers, seems destined to leave Canada," said Jim Balsillie, RIM's co-chief executive officer, in a statement. "RIM remains extremely interested in acquiring Nortel assets through a Canadian ownership solution that would serve the dual purpose of keeping key wireless technologies in Canada and extending RIM's leadership in the research, development and distribution of leading-edge wireless solutions, but RIM has found itself blocked at every turn."
The key sticking point, according to RIM's prepared statement, is a stipulation barring the company from bidding for other Nortel assets for a year if the company enters the bidding process.
According to a statement from MatlinPatterson, the private equity's interest stems from a desire to create a "new Nortel" that could thrive as a standalone company once freed from its pre-bankruptcy obligations.
"Through an exhaustive due diligence process led by its team of advisors, which also includes former executives of AT&T Wireless, Alltel and Motorola, MatlinPatterson determined that these assets can form the basis of a standalone enterprise with long-term viability that will meet the needs of all stakeholders," the statement said. "This independently held business would provide a range of opportunities -- from additional bolt-on acquisitions to partnerships to reinvention and new ideas from within the technology asset base."
NSN likely to capture Nortel telecom assets
As the situation stands now, however, NSN appears likely to win the bidding process, even with MatlinPatterson's interest. Analysts believe that the private equity firm, a partial stakeholder in Nortel already, is trying to bump up the price and make sure NSN bids fair value.
"This might be considered to be a guts check on NSN," said Tom Nolle, president of CIMI Corp. "You put a bid in that's a little bit higher, and you kind of know they'll bid higher, but what you're trying to do is see if NSN is going to gut it out."
If NSN isn't willing or able to pay market value for the assets, Nolle said, MatlinPatterson could easily flip the Nortel properties later, either to NSN or one of its competitors. Or it could start selling off intellectual property assets and then flip the remaining portions to one of the other telecom players looking to expand either their technology or customer base.
"Whether [NSN's offer] is so much of a low-ball that somebody would be willing to take a chance about throwing money at it, I'd be antsy," Nolle said. "If NSN puts another bid on it, which is a virtual certainty, then these guys would be smart to drop out."