Nortel Networks Ltd. said on Friday it is selling its third-generation UMTS cell phone network division to Alcatel for $320 million, so it can better focus on the continued transformation of its operations as well as what it termed “integrity renewal.”
The transaction is expected to close in the fourth quarter. Alcatel stocks were trading 5 cents lower at midday Friday than the Aug. 31 closing price of $12.53, on the news. Nortel shares, meanwhile, were up 2 cents, trading for $2.11.
"Nortel is sharpening its focus on the markets in which we intend to lead. Our UMTS access business lacks the scale and momentum needed to become profitable," said Mike Zafirovski, president and CEO of Nortel.
Nortel has been changing the trajectory of its business by partnering with companies such as Microsoft Corp. and LG as it works to get into the unified communications and WiMAX markets. Shedding the UMTS unit frees it up to focus on mobility, services and applications, the company said.
"With next-generation mobility, we see an opportunity to change the game by applying our networking expertise and technology innovation to significantly alter the economic paradigm of mobility solutions in the future," Zafirovski said.
Nortel will continue to develop and support platforms for the growth of GSM access and core, GSM-R, GPRS and EDGE technologies, as well as CDMA access and core and UMTS core, the company said.
Most of Nortel’s UMTS employees will be moved over to Alcatel. Alcatel said acquiring Nortel’s assets will allow it to serve 14 additional UMTS customers around the world, especially in 3G markets such as South Korea, Italy, Spain, France and the U.K. Alcatel also plans to roll out services in fast-growing 3G markets such as China.
"Combined with our strong GSM/EDGE position, our early leadership in WiMAX and our strong commitment to LTE, this acquisition will add further momentum to Alcatel's broadband wireless access strategy,” said Marc Rouanne, president of Alcatel's mobile communications activities. “Through the contemplated merger with Lucent, the combined company will also enjoy a leading position in CDMA EV-DO, including a clear commitment to Rev C, thus offering the most comprehensive and innovative wireless access portfolio in the industry.”
The proposed sale includes Nortel's UMTS access product line, which is made up of the radio network controller, Node B products and OAM solutions, as well as their related services and assets.
Alcatel www.alcatel.com
Lucent Technologies www.lucent.com
Nortel Networks Ltd. www.nortel.com
