Old telecom companies never die, they just end up as part of Web companies’ patent trust. After all, the distinction between telecom and web are fading fast…

Google is willing to shell out $900 million for about 6,000 patents covering all sorts of communications technologies. Why is this relatively young company interested in Nortel patents? Some may even liken it to Google digging up fossils (after all, Nortel is a dinosaur compared to Big G).

In short, Google is fed up with being sued, especially by patent trolls:

The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation. Some of these lawsuits have been filed by people or companies that have never actually created anything; others are motivated by a desire to block competing products or profit from the success of a rival’s new technology. The patent system should reward those who create the most useful innovations for society, not those who stake bogus claims or file dubious lawsuits. It’s for these reasons that Google has long argued in favor of real patent reform, which we believe will benefit users and the U.S. economy as a whole.

This widens Google’s defense against its competitors as well as “dubious lawsuits.” Should Google indeed end up owning these Nortel patents, the company may even go on the offensive. Who would’ve ever thought that a Web giant like Google (incorporated in 1998) could potentially file a patent infringement suit against, say, AT&T (founded 1885)…

The patent acquisition also happened on co-founder Larry Page’s first day as Google CEO, replacing Eric Schmidt. Quite a tactical move for the first day on a job. Page means business, and he is definitely not afraid to spend money or pick up valuable scrap from the industry heap.

The official word from Nortel (lots of fine print):

April 4, 2011

• Enters into Stalking Horse Sale Agreement with Google Inc. for US$900 million in cash
• Planned sale includes approximately 6,000 patents and patent applications covering a broad range of wired, wireless and digital communication technologies
• Subject to Canadian and U.S. court approvals, auction expected in June 2011

TORONTO – Nortel Networks Corporation announced that it, its principal operating subsidiary Nortel Networks Limited (NNL) and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited (in administration), have entered into a stalking horse asset sale agreement with Google Inc. for the sale of all of Nortelfs remaining patents and patent applications for a cash purchase price of US$900 million.

The agreement includes the planned sale of approximately 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.

This agreement follows a confidential, multi-round bidding process involving several interested companies and consortia from around the world.

“This is an unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market”, said George Riedel, Chief Strategy Officer and President of Business Units, Nortel. “We look forward to what we hope will be a robust auction, following the requisite court approvals, currently expected to be held in June 2011″.

Details of Sale Process

Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice. Following completion of the bidding process, final approval of the U.S. and Canadian courts will be required.

In addition to the processes and approvals outlined above, consummation of the transaction is subject to the satisfaction of regulatory and other customary conditions.

****************

As previously announced, Nortel does not expect that the Company’s common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.

About Nortel
For more information, visit Nortel on the Web at www.nortel.com . For the latest Nortel news, visit www.nortel.com/news .

Certain statements in this press release may contain words such as “could”, “expects”, “may”, “should”, “will”, “anticipates”, “believes”, “intends”, “estimates”, “targets”, “plans”, “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. Nortel’s assumptions, although considered reasonable by Nortel at the date of this press release, may prove to be inaccurate and consequently Nortel’s actual results could differ materially from the expectations set out herein.

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 the Creditor Protection Proceedings including: (a) risks associated with Nortel’s ability to: stabilize the business and maximize the value of Nortel’s businesses; obtain required approvals and successfully consummate pending and future divestitures; ability to satisfy transition services agreement obligations in connection with divestiture of operations; 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; allocation of the sale proceeds of our businesses among the various Nortel entities participating in these sales may take considerable time to 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; continue to have cash management arrangements and obtain any further required approvals from the Canadian Monitor, the U.K. Administrators, the U.S. Principal Officer, 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 Nortel; 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; operate Nortel’s business effectively under the new organizational structure, and in consultation with the Canadian Monitor, and the U.S. Creditors’ Committee and work effectively with the U.K. Administrators, French Administrator and Israeli Administrators in their respective administration of the EMEA businesses subject to the Creditor Protection Proceedings; continue as a going concern; 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 as may be needed; retain, or if necessary, replace major suppliers on acceptable terms and avoid disruptions in Nortel’s supply chain regarding our remaining businesses and stranded contracts; 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; 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 court approved plan to outstanding Nortel securities and, in particular, that Nortel does not expect that any value will be prescribed to the NNC common shares or the NNL preferred shares in any such plan; 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 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; 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;; 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 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC. 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.

For the Companies listed below, The Institute of Chartered Accountants in England and Wales authorises A R Bloom, S Harris and C Hill to act as Insolvency Practitioners in the UK under section 390(2)(a) of the Insolvency Act 1986 and the Association of Chartered Certified Accountantsauthorises A M Hudson to act as an Insolvency Practitioner in the UK under section 390(2)(a) of the Insolvency Act 1986.

The affairs, business and property of the Companies are being managed by the Joint Administrators, A R Bloom, S Harris, AM Hudson and C Hill who act as agents of the Companies only and without personal liability.

The affairs, business and property of Nortel Networks ( Ireland ) Limited are being managed by the Joint Administrators, A R Bloom and D Hughes, who act as agents of Nortel Networks ( Ireland ) Limited only and without personal liability.

The Companies are Nortel Networks UK Limited; Nortel Networks SA; Nortel GmbH; Nortel Networks France SAS; Nortel Networks NV; Nortel Networks SpA; Nortel Networks BV; Nortel Networks Polska SP Zoo; Nortel Networks Hispania SA; Nortel Networks (Austria) GmbH; Nortel Networks sro; Nortel Networks Engineering Service Kft; Nortel Networks Portugal SA; Nortel Networks Slovensko sro; Nortel Networks Oy; Nortel Networks Romania SRL; Nortel Networks AB; Nortel Networks International Finance & Holding BV

In addition on 28 May 2009, secondary proceedings were opened in relation to Nortel Networks SA pursuant to which the French Court authorized Nortel Networks SA to continue to operate the business owned and operated by Nortel Networks SA and appointed inter alia the French Office Holders as the administrators and liquidators of NNSA who act as agents of Nortel Networks SA and without personal liability.
*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

Contacts for Press and Analysts:

For more information:

Media Relations

MediaRelations@nortel.com

 

Additional Media & Analyst Contacts

 

Nortel may have fallen, but its intellectual properties still hold some good value, according to this Reuters report.

Bids are soon due for the patent portfolio of Nortel Networks and among those interested is Apple, propelled by the success of the iPhone to become a relatively new entrant in telecom:

The patents cover wireless handsets and infrastructure, as well as optical and data networking, Internet, Internet advertising, voice and personal computers.

The patents likely to draw the most attention relate to third- and fourth-generation wireless technology such as Long Term Evolution, with device-makers such as Research In Motion, Motorola, and Apple seen as likely bidders.

Of course, Google is in the bidding too. These Silicon Valley tech giants have become a major driving force in the convergence of computing and telecom. Both Google and Apple have enough cash on hand to start a bidding war as well, and we all know that these two companies have evolved from friends to competitors recently.

A bidding war between Google and Apple for Nortel patents — now that’s what I’d call entertainment!

UK-based analyst firm MZA recently publicized a global PBX market report crowning Avaya as the new leader, thanks to its acquisition of Nortel Enterprise Solutions:

Avaya continued to lead the world PBX market, growing market share from 13% in Q1 2010 to 15% in Q2 2010. Its leadership position was first attained as a result of the acquisition of Nortel. Cisco was in second position with a stable 12% market share while Panasonic moved from fourth position in the last quarter to third position in this, maintaining its 11% share. Panasonic continued to lead in the Below 100 Extensions sector with a steady 16% market share, ahead of NEC in second position and Avaya in third position. In the Above 100 Extensions market, Cisco was the market leader with a 24% market share, followed by Avaya.

It’s neck-and-neck between Avaya and Cisco. However, Cisco leads in the 100+ extensions market with nearly a 1/4 stranglehold on the market. Additionally, Cisco maintains its lead in IP extensions — 1/3 of the market, ahead of Avaya by over 10%. The IP segment is what’s growing.

Avaya’s lead of 3% is indeed noteworthy, but more noteworthy is that it’d spent almost half billion dollars to gain that small market edge. That’s no pocket change. Only to step on Cisco’s pinky. In a technology segment that’s shrinking.

To me that is a bit troubling. Maybe it’s time to abandon that tablet thingy? Resources could definitely be allocated elsewhere…

Well, it appears that many other industry pundits and analysts are posting their VoiceCon previews and expectations, so I figure I better do it too. I mean, I certainly don’t want readers to feel disappointed by my lack of expectations prior to the conference in sunny Orlando…

I expect to see the keynote speakers wear Mickey Mouse ears, or at least the Goofy ears, during their presentations about industry trends, latest technologies, and company news. What better way to capture the attention of hundreds of over-caffeinated telecom geeks professionals, media hounds analysts, and vacationing exhibiting executives? And if you really want to impress the audience, work out a deal with Pixar (a Disney company) to show the new Toy Story 3 trailer in 3D. It’s okay that Woody and Buzz are more popular than you when in Orlando…

I expect Nortel employees to show up in t-shirts saying “I’m with Avaya,” and Avaya employees in shirts that say “I <3 Nortel”… This would be a great way to assure your customers that everything after the acquisition is a-okay. Who needs a product roadmap when you’ve got employees that publicly demonstrate their affection for each other? Team hugs between “exponentially better” employees also encouraged.

I expect nobody at the Aspect booth to openly use an Apple iPhone. It’s frowned upon at Microsoft, and therefore the same should apply to Aspect.

Lastly, I expect Cisco to forever change the Internet. Oh wait, did it already do that? Then how come my March Madness streaming games via CBS Sports is still so choppy over my 12 Mbps broadband connection?

In all seriousness, I am very excited to attend VoiceCon to learn what companies are doing to fulfill the latest customer demands. I am also looking forward to network and meet new people and actually shake hands instead of tweeting or exchanging emails….

Round one was a battle of the blogs, so naturally round two took place on — where else? — Twitter (conversation between Mike Sheridan, EVP of sales at Aspect, and Jon Alperin, director of developer relations at Avaya):

First of all, there was a SIP party? I guess I wasn’t invited. Would’ve been interesting to see some VoIP packets gone wild…

Is this a fair fight? Of course! All’s fair in love and war and telecom. But here’s an example of how standardization diminishes vendors’ distinction: If everybody offers SIP solutions then what’s so different between them?

To the customer, probably not much. All the customer cares is 1) It works; 2) It’s affordable; and 3) It’s supported long term. It may very well boil down to cost and platform ecosystem (e.g. extending and expanding the solution), but even those two factors are highly competitive among vendors. Yes, it is definitely a buyer’s market.

I do see a trend in 2010 which Avaya will have to constantly play defense against competitors like Aspect, at least until positive words from the field rise through the public channels regarding the execution of the Nortel roadmap. Aspect and other Avaya competitors are doing the smart thing by being aggressive during this time of uncertainty from Avaya/Nortel customers. It’s the nature of the business. Their success in wooing these customers remains to be seen, but we know they are already working hard on it.

Cisco is still on the sidelines being a quiet spectator. The company that dragged every TDM vendor into the SIP market is sitting pretty, probably laughing to itself. Oh wait, it did announce a massive new router capable of boosting the Internet backbones, like being able to let the entire population in China make a video call simultaneously. (Booooooring, right? Unless the Middle Kingdom becomes one ginormous contact center then I would care…)

The gloves are starting to come off between these major contact center and telecom vendors.

As Avaya digests its Nortel platter, Aspect, a primary competitor, takes no time to stir up the FUD sentiment relating to the merger. Aspect’s Mike Ely, Director of System Architecture, jabs at Avaya’s SIP and UC roadmaps:

…

The issue, however, is that focusing on SIP is relatively new to the Avaya roadmap. Customers and prospects should look for a SIP interoperability policy from Avaya in order to fully understand the implications of leveraging proprietary SIP applications. Contact centers should carefully vet the levels of additional charges could be required to SIP-enable existing switches to work directly with the Aura environment. The alternative is that they will continue with their TSAPI computer telephony integration (CTI) solution – which should be displaced by IP-based integration – without fully leveraging a SIP backbone. Thus, Avaya-Nortel customers may not be able to standardize their contact center applications on a multi-vendor hardware infrastructure. Aspect has long recognized the importance of standards-based solutions in that they do not lock organizations in to proprietary applications or hardware as they look to enhance and upgrade as needed to address business objectives.

Avaya has not yet outlined a specific strategy related to bringing unified communications and collaboration capabilities to their Aura platform. This has implications for Nortel customers who’ve developed strategies around Microsoft technology, and should raise some questions from those who are still forming their unified communications plans. Customers who’ve planned around Microsoft technologies should ask whether the Aura communications backbone will enable them to leverage Microsoft Office Communications Server (OCS) as a unified communications infrastructure – or will they have to start over with a new unified communications platform?  In addition, companies should compare the number of components and communications infrastructure complexities of an Aura and if it will provide the key unified communications functionality and office integration that Microsoft OCS provides.  They need to examine if it will be a redundant component complicating management and if it will increase the cost compared to a rich OCS deployment.

…

To which Jon Alperin of Avaya politely responds:

…

Over 8 years ago, Avaya formalized the DevConnect Program to provide third parties with the technical support, resources and compliance testing programs necessary to deliver innovative joint solutions with a recognized level of interoperability. This extends to providing our customers, channels and support teams with the documentation and configuration information necessary to allow successful implementations.

To paraphrase a comment made at the 2009 VoiceCon show in Orlando, if you know who your members are and what they are doing, you really don’t have a developer program. Well, DevConnect has certainly grown to become a true developer program, with over 10,000 companies developing more solutions than we can even imagine. In fact, DevConnect is recognized by leading analysts including Gartner, Canalys and The Yankee Group as an important strength in Avaya’s market leadership position. With the addition of Nortel’s portfolio, DevConnect supports over 170 different open interfaces across more than 40 products or platforms.

We don’t think of SIP as simply a protocol. To Avaya, SIP is the underpinning of an entire architectural model, inclusive of endpoint devices, network interconnections with Service Providers, and for providing new flexibility in connecting the right applications to the right people.

…

We recognize that our customers rely heavily on contact center and Unified Communications applications to run their business, and that there is a cost to migrating fully functioning and useful applications from older, well established APIs such as TSAPI/JTAPI to any other protocol. So we don’t force them to do this. Instead we enable them to gain the advantages of SIP, including access to rich presence-based information, by allowing them to gently introduce SIP into their network architectures where and when it makes financial sense to do so for their unique situations.

…

There’s no winner to declare here. Both have made valid arguments and good points. However, the volley of blog posts between Aspect and Avaya gives us a glimpse of how traditional telecom vendors are dealing with the ever evolving communications landscape — in this case, SIP (Session Initiation Protocol) — and the realities of the business world.

Aspect has always been focused on contact center technologies, from the ACD to CTI to workforce management to UC. It knows contact center software. It has always billed itself as a software company and has consistently placed in Gartner’s Leaders quadrant in recent years for worldwide contact center infrastructure. Being a software company it knows the importance of interoperability and platform and standards. That’s why it also has an intimate partnership with the world’s largest software company, Microsoft. In fact, the Redmond Giant has an unspecified equity stake in Aspect, ensuring that Microsoft will always have an entry point into the contact center business and not just enterprise communications (via its Office Communications Server offering). Transitioning to something like SIP is almost a natural course of progression for Aspect — just get the engineers to tweak some code and be done! Next standard, please!

Avaya, on the other hand, has a history of spin-offs and mergers. It was spun-off from Lucent’s business communications division. It was privatized by two well-known equity firms. It then won the bid for Nortel’s Enterprise Communications division. The company has always been about selling the box (hardware) as much as what’s inside it (software). It was also successful in dominating the contact center business with its PBXs and servers thanks to its developer-friendly DevConnect Program which allows third parties to create applications surrounding its communications platform. Moving from traditional TDM applications to SIP-based ones weren’t as simple for Avaya and its peers (e.g. Nortel). Most of the time it required additional boxes to enable the SIP solution, and thinking hard about what products are worth the additional resources to IP-enable them and how to satisfy existing customers who weren’t ready for IP.

The bottom line? Software-centric vendors like Aspect believes that it is the hare compared to the tortoise that is Avaya (and an even slower tortoise with Nortel on board). We all know how the old fable ended. But in today’s dynamic competitive business environment, the hares know better not to nap and the tortoises know to wear skates.

And I’m awaiting Cisco’s response…

It may very well be the end of an era for Nortel as nobody is interested in buying the name. The company was carved up into various businesses to be auctioned and sold off, but the brand failed to attract any buyers:

When Nortel Networks decided to auction itself off in pieces, its name was of the items on block. But now with its last business unit slated to go to Genband, Nortel hasn’t found anyone interested in taking up the moniker despite its long history in the industry.

Genband executive vice president and chief marketing officer Mehmet Balos said Genband had the option of buying the name when it placed its bid on Nortel’s switching and VoIP divison, but it declined. Ericsson (NASDAQ:ERIC), Ciena (NASDAQ:CIEN), Avaya and Hitachi all left the Nortel logo on the table to as they carved off their respective pieces in Nortel’s CDMA, GSM, packet core, enterprise and optical businesses.

Incorporated as the Northern Electric and Manufacturing company in 1895, the company is one of the oldest in communications, becoming Northern Telecom in 197os and Nortel Networks in the 1980s.

How about auctioning it off on eBay and let common people bid on it? I’m sure some ex-employees or telecom professionals may be interested? I know I am. I’ll start the bid at $20.

After a merger or acquisition it’s usually headcount reduction time. The axe cometh now that Avaya has absorbed Nortel. One of the first high-profile casualties — the Avaya Australian R&D staff:

Networking vendor Avaya appears set to shut down its research and development lab in North Ryde, Sydney – remembered affectionately as the Australian arm of Bell Labs.

Multiple sources told iTnews that the majority of R&D staff at the lab were informed that their positions would no longer be available.

After repeated attempts to contact Avaya, the company confirmed that it was “consolidating some of its R&D functions” in Australia as part of a “global realignment”, but refused to divulge how many researchers were laid off.

Hmmm, “global realignment”? My guess is that the realignment is likely to be lopsided with China getting a lot of attention.

There has been a lot of discussion surrounding the Avaya-Nortel (Enterprise Solutions) acquisition and the recently released product roadmap. Major Avaya competitors have offered their cautionary view. From Aspect:

…

Avaya has stated that it will be selectively choosing its best of breed capabilities based on the Avaya and Nortel product portfolio.  While we applaud this approach, we also question the impact it will have on its customers. With two product portfolios that are largely based on proprietary technology and competing product strategies, this means that in many cases there will not be an optimal migration path for customers that are not on the platform of choice for future development. This will require significant investments and forklift upgrades for the combined Avaya/Nortel customer base.

Based upon our company’s experience with large mergers and acquisitions, Aspect believes that Avaya has a monumental task in trying to maintain customer satisfaction while trying to build credibility in the unified communications (UC) market, integrating platforms, maintaining continuity in its contact center offerings, and making adjustments to its workforce under a newly-appointed management team; a challenge while having fewer people supporting a significantly expanded product portfolio.  Based upon our past experience and Avaya’s just-released roadmap, we have insight into some of the challenges they’ll face in the coming years:

…

And also from Interactive Intelligence.

Their bottom line to Avaya-Nortel customers: brace yourselves because it’s going to be a bumpy ride!

The new Avaya is now the dominant force in contact center solutions, but it is also the most bloated at the moment. Announcing the product roadmap will ease some concerns from customers, but as we all know about eating a big meal — it’s about how to keep the food down. Avaya will need near perfect execution in absorbing the whole Nortel ES — products, services, headcount, and then some.

As others have opined, it won’t be easy. Nortel has fallen hard with a troubled past and poor management. Remember the Clarify deal in 1999? Looking to cash in on the dot-com craze Nortel offered $2 billion in stocks for CRM software maker Clarify, only to sell it two years later to Amdocs for $200 million in cash. Its executives was caught in a financial scandal involving $3 billion misstated revenue over 1998, 1999, and 2000. Tens and thousands of workers were let go in subsequent restructuring and reorganization efforts.

Nortel became a perfect case study for Harvard Business.

But Avaya has the backing of two reputable private equity firms, Silver Lake Partners and TPG Capital. These firms privatized the company for $8.2 billion in October 2007 and are no strangers to high-profile technology companies. Among their other investments include Skype, Seagate Technology, Freescale Semiconductor, and Alltel Wireless.

Obviously they did not consider Nortel assets to be toxic. But right now as Avaya is going through growing pains, competitors are readying their sales force to capitalize on Avaya-Nortel customers’ FUD (fear, uncertainty, and doubt) sentiments. Genesys and Cisco are the two companies which stand to lose significant IVR market share in light of a beefed up Avaya. I would not be surprised to see Genesys and Cisco — both known to have very aggressive sales programs in the industry — to start offering deep discounts and incentives to convert existing Avaya and Nortel customers during this time of transition.

For telecom and contact center customers, now is a great time to shop around.