Summary
1. The source article is contemplating “what if Nortel can’t sell the [MEN] business.” 2. This possibility seems rather unlikely in that it will get down to a price that will be attractive enough for another player to pull the trigger. 3. It would be hard for the MEN division to survive on its own in a spinoff.
Analysis
It is true that a separate private company “would not be saddled with all of Nortel’s financial troubles and the distractions from the higher-level management team.” Whether it has “the technology chops to really move the ball forward in the 40G and 100G space,” is not really the essential issue. The carriers would most likely be even less interested in dealing with such a small new vendor that was once a part of a brand that has been so tarnished. It is also hard to believe that there are “operators [that really] do want Nortel metro around,” as stated in the related Light Reading piece. Moreover, the margin pressures on high-end optical transport would make it very difficult for an independent MEN unit to continue to exist.
As far as private equity companies are concerned, it seems as if purchasing MEN would be a very high-risk proposition. It appears to us that the most likely buyers are Ericsson and Nokia-Siemens (despite saying “it has no intention of buying more Nortel divisions”). However, with such high stakes on the wireless side of their US businesses, they both might not want to have any diversions at this time.
