Nortel break-up to shift IP communications market

[1]The race is on for Nortel's Enterprise Solutions division, which is its second-largest division by revenue, and the eventual buyer certainly will gain clout and share from the purchase. It remains to be seen which company will emerge as the winner of the Nortel sweepstakes, but the affect of Nortel's divestiture on the IP communications space is hardly in doubt.

Nortel has a 20 percent share of the global softswitch market, as well as a 59 percent share by revenue of the North American market, according to analyst reports [2], in addition to a major unified communications partnership with Microsoft.

Nortel's strong presence in North America had prominent analyst Zeus Kerravala thinking potential buyers are more interested in acquiring customers rather than technology through the deal. Kerravala, senior vice president of the Yankee Group, told Searchunifiedcommunications.com [3] that the main goal of a rival picking off Nortel's enterprise group is to migrate the new customers to proprietary systems and gear eventually.

He sees Avaya and Siemens as likely buyers of Nortel Enterprise solutions, because both would gain significant U.S. market share through the deal. Canada's Globe and Mail reported Wednesday [4] that Avaya has made a $500 million offer for the unit, but the company declined to comment on the purported deal. Avaya would become the U.S. voice leader with the buy, according to Kerravala, and Siemens would gain a U.S. foothold with Nortel's enterprise and government customers.

Avian Securities LLC analyst Catharine Trebnick sees some different potential buyers [5] making a play for Nortel's carrier switching assets, including Sonus Networks and Nokia Siemens Networks. Trebnick notes that the buyer likely will get a significant discount for the division due to Nortel's urgency to sell, just as NSN got when it bought Nortel's LTE and CDMA unit [6] for $650 million last week. Trebnick thinks Nortel's total enterprise unit is "a billion-dollar business," but would likely sell the unit or pieces of it for considerably less than that.

Another potential casualty of Nortel's break-up: its three-year unified communications partnership [7] with Microsoft, called the Innovative Communications Alliance. That partnership is set to end in 2010, and with Microsoft recently announcing another high-profile UC partnership, this one with HP, it looks unlikely the ICA will be renewed. Executives responsible for the ICA project in Europe, the Middle East and Africa have already been laid off [8].

Where do you think the Nortel assets will land, and what does the break-up of partnerships and potential market share shake-up mean for the industry? 

- Pete [9]
@fiercevoip [10]