Summary
It is some small comfort to Nortel's creditors that a bidding war developed for this company's remaining wireless infrastructure business. Ericsson was motivated to do its best to win this auction for both offensive and defensive reasons.
Analysis
Ericsson has recently made major strides in the North American market with its win for LTE with Verizon Wireless and its network outsourcing contract with Sprint. These new relationships with the two major CDMA2000 operators in the U.S., traditionally not customers of Ericsson because it stayed out of the CDMA2000 arena, establishes a firm basis, when combined with its positions among GSM/WCDMA operators, for the company to become the clear leader in the supply of wireless infrastructure in North America, well ahead of its rivals Alcatel-Lucent and Nokia Siemens (which has been a minor player in North America), as well as the fading Motorola and the hard charging newcomer Huawei. It may be just as if not more valuable for Ericsson to deny a rival access to Nortel's human and other resources and contacts among North American operators by acquiring them, as it is to augment its own engineering capabilities with Nortel's. Presumably the bankruptcy court would have had to find extraordinary reasons and justifications not to accept the highest bid (Ericsson's), especially since reportedly Ericsson has said it intends to keep on all Nortel staff involved, which conveniently makes sense to help ensure that its outsourcing contract with Sprint's CDMA2000 network (for which Nortel was one of the major suppliers) is successful for both parties.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
