Fire Sale or Strategy?
Mark Evans posted on the Nortel announcement this morning of the worst kept secret in Telecom this year – the acquisition of Nortel’s UMTS business by Alcatel. Leaking rumours of this deal over a month ago may have had something to do with the lower than expected price that Alcatel paid for the business unit. Honestly, someone needs to teach these guys … a little about negotiation before they embark on their next major business transaction.
As the guy who lead the development of this technology within Nortel a few years ago, I must admit feeling a little melancholy over the announcement. It has been clear for some time, however, that Nortel needed to do something dramatic as they couldn’t continue to invest in a business that was loosing that kind of money, with no end in sight.
Once again, we are left to wonder what will become of this once great company. They claim to see a strong future in wireless, and remind us that it is possible to skip a generation in technology – and that they are more excited by 4G opportunities. I hope they are right, but then again, their investment in 3G was intended to create a leadership position in that segment, following a rather poor showing in 2G (GSM). Now it seems their 2G investment has proved more successful than 3G (UMTS). This does not fill one full of confidence over a possible 4G technology strategy – especially given that Samsung has already demonstrated an advanced implementation.
That said, the company still has some of the best technical brains in the business, and if the GE management pedigree is all it has been cracked up to be, they just may pull this rabbit out of the hat. I certainly hope so, but ‘Hope’ is the operative word, as Mike Z has yet to unveil any details of their long anticipated strategy, let alone a plan for success.
Update: I commented on Mark Evans blog regarding the degree of mismatch between some expectations of the value of Nortel’s UMTS business to Alcatel, and what they actually got. Â You can find more details there, but suffice it to say that estimates went as high as $1.9b, and on the day of sale French analysts were reporting that they had expected the sale to fetch $1.28b. Â All in all, a far cry from what Nortel received.
