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Nortel Selects Avaya as Successful Bidder for Enterprise Solutions Business
-Will sell the assets of the Enterprise Solutions Business, and shares of Nortel Government Solutions and DiamondWare to Avaya
-Avaya to Pay US$900 Million in Cash to Nortel, with an Additional Pool of US$15 Million Reserved for an Employee Retention Program
-Canadian and U.S. Court Approvals of Sale will be Sought at a Joint Hearing on September 15
-Combination Provides Current and Future Customers with Investment Protection and Clear Path Forward
Nortel* Networks Corporation [OTC: NRTLQ] announced today that it, its principal operating subsidiary Nortel Networks Limited, and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited, have concluded a successful auction of substantially all of the assets of Nortel's global Enterprise Solutions business as well as the shares of Nortel Government Solutions Incorporated and DiamondWare, Ltd. Avaya Inc. (Avaya) has emerged as the winning bidder agreeing to pay US$900 million in cash to Nortel, with an additional pool of US$15 million reserved for an employee retention program.
The sale is subject to court approvals in the U.S., Canada, France and Israel as well as regulatory approvals, other customary closing conditions and certain post-closing purchase price adjustments.
Commenting on the announcement, Nortel Enterprise Solutions President Joel Hackney said:
"This is fantastic news for our customers, as this will empower us to continue to deliver industry-leading solutions and services focused on unlocking the enterprise business potential enabled by unified communications. It provides the capability to chart our future with laser-focus, enabling customers to compete in new ways with greater scale and resources. We look forward to working closely with our customers, partners and stakeholders during this pre-close phase to ensure that we continue to innovate to meet customers' needs with high-performance, efficient and secure communications 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. "Through deal close and beyond, we will deliver on our stated customer commitments and maintain high levels of service and support. 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."
In addition, given the complementary strengths of the two companies in the U.S. Federal Government market, the combined operations are anticipated to yield a company best-suited to address the unique information technology requirements of the civil government and military.
Noted Chuck Saffell, CEO of Nortel Government Solutions:
"The companies' strengths in the information technologies sector of the U.S. Federal Government are remarkably complementary. Our combined product offerings, as well as our strong professional services business and solutions approach provide a win-win for both our government customers and our business. With our combined knowledge of the federal market, we will be focused on delivering the best-performing, most cost-effective capabilities available to support our customers' mission. Our goal continues to be helping our customers provide security, livelihood and well-being for the citizens of the United States."
Customers look forward to the potential the future holds for them.
"Nortel earned the trust of our user group members by delivering innovative, reliable communications solutions and ensuring high-levels of service and support, " said Victor Bohnert, Executive Director of the International Nortel Networks Users Association. "With the announcement of today's purchase by Avaya, we look forward to extending that relationship forward to serve the business communications needs of our constituency base across the globe."
Partners also benefit from the move.
Both Nortel and Avaya channel partners will have opportunities to grow their business as the move to unified communications accelerates and the need for advanced services to design, deploy and manage such solutions expand. "The independent members of the Nortel Distributor Alliance Council are excited about the future potential that today's announcement brings to the tens of thousands of enterprise customers we support," said Rick Dawybida, President of DAC Americas. "We look forward to a commitment focused on ensuring customers can fully leverage their prior investments while also getting expanded choices. The combined portfolio capability of Avaya and Nortel will offer the marketplace industry-leading solutions as companies move aggressively to unified communications."
While today's auction is a significant step in the overall sale process, it is not the final step. Nortel will work diligently with Avaya to close the sale later this year, subject to the timing of regulatory approvals. Nortel will seek Canadian and U.S. court approvals of the proposed sale agreement at a joint hearing on September 15, 2009. The sale close is expected late in the fourth quarter 2009. In some EMEA jurisdictions this transaction is subject to information and consultation with employee representatives.
As previously announced, the Company does not expect that its common shareholders or the preferred shareholders of Nortel Networks Limited will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.
Media and Industry Analyst Call: Representatives from Nortel will hold a teleconference/audio webcast for media and industry analysts at 9:30 AM ET on Monday, September 14, 2009.
Certain statements in this press release may contain words such
as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on Nortel's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. Further, actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following (i) risks and uncertainties relating to Nortel's Creditor Protection Proceedings including: (a) risks associated with Nortel's ability to: stabilize the business and maximize the value of its businesses; obtain required approvals and successfully consummate pending and future divestitures; successfully conclude ongoing discussions for the sale of Nortel's other assets or businesses; develop, obtain required approvals for, and implement a court approved plan; resolve ongoing issues with creditors and other third parties whose interests may differ from Nortel's; generate cash from operations and maintain adequate cash on hand in each of its jurisdictions to fund operations within the jurisdiction during the Creditor Protection Proceedings; access the EDC Facility given the current discretionary nature of the facility, or arrange for alternative funding; if necessary, arrange for sufficient debtor-in-possession or other financing; continue to have cash management arrangements and obtain any further required approvals from the Canadian Monitor, the U.K. Joint Administrators, the French Administrator, the Israeli Joint Administrators, the U.S. Creditors' Committee, or other third parties; raise capital to satisfy claims, including Nortel's ability to sell assets to satisfy claims against us; maintain R&D investments; realize full or fair value for any assets or business that are divested; utilize net operating loss carryforwards and certain other tax attributes in the future; avoid the substantive consolidation of NNI's assets and liabilities with those of one or more other U.S. Debtors; attract and retain customers or avoid reduction in, or delay or suspension of, customer orders as a result of the uncertainty caused by the Creditor Protection Proceedings; maintain market share, as competitors move to capitalize on customer concerns; operate Nortel's business effectively in consultation with the Canadian Monitor, and work effectively with the U.K. Joint Administrators, French Administrator and Israeli Joint Administrators in their respective Administration of the EMEA businesses subject to the Creditor Protection Proceedings; actively and adequately communicate on and respond to events, media and rumors associated with the Creditor Protection Proceedings that could adversely affect Nortel's relationships with customers, suppliers, partners and employees; retain and incentivize key employees and attract new employees, as may be needed; retain, or if necessary, replace major suppliers on acceptable terms and avoid disruptions in Nortel's supply chain; maintain current relationships with reseller partners, joint venture partners and strategic alliance partners; obtain court orders or approvals with respect to motions filed from time to time; resolve claims made against Nortel in connection with the Creditor Protection Proceedings for amounts not exceeding Nortel's recorded liabilities subject to compromise; prevent third parties from obtaining court orders or approvals that are contrary to Nortel's interests; reject, repudiate or terminate contracts; and (b) risks and uncertainties associated with: limitations on actions against any Debtor during the Creditor Protection Proceedings; the values, if any, that will be prescribed pursuant to any restructuring plan to outstanding Nortel securities; the delisting of NNC common shares from the NYSE; and the delisting of NNC common shares and NNL preferred shares from the TSX; and (ii) risks and uncertainties relating to Nortel's business including: the sustained economic downturn and volatile market conditions and resulting negative impact on Nortel's business, results of operations and financial position and its ability to accurately forecast its results and cash position; cautious capital spending by customers as a result of factors including current economic uncertainties; fluctuations in foreign currency exchange rates; any requirement to make larger contributions to defined benefit plans in the future; a high level of debt, arduous or restrictive terms and conditions related to accessing certain sources of funding; the sufficiency of workforce and cost reduction initiatives; any negative developments associated with Nortel's suppliers and contract manufacturers including Nortel's reliance on certain suppliers for key optical networking solutions components and on one supplier for most of its manufacturing and design functions; potential penalties, damages or cancelled customer contracts from failure to meet contractual obligations including delivery and installation deadlines and any defects or errors in Nortel's current or planned products; significant competition, competitive pricing practices, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Nortel's performance if its expectations regarding market demand for particular products prove to be wrong; potential higher operational and financial risks associated with Nortel's international operations; a failure to protect Nortel's intellectual property rights; any adverse legal judgments, fines, penalties or settlements related to any significant pending or future litigation actions; failure to maintain integrity of Nortel's information systems; changes in regulation of the Internet or other regulatory changes; and Nortel's potential inability to maintain an effective risk management strategy. For additional information with respect to certain of these and other factors, see Nortel's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009 and Annual Report on Form 10-K for the year ended December 31, 2008 and other securities filings with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.
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