Splitting of Nortel May Be Only Viable Option

Implications: 1.      At about the same time, two prominent industry analysts are recommending a breaking up/refocusing of Nortel. 2.      Is this development just a coincidence? 3.      Nortel may be floating a trial balloon to determine the telecom market’s reaction to divesting or spinning off its wireless business.

Analysis:  In recent weeks, both the CEO and CTO of Nortel have been talking up the 4G opportunities.   According to them, the market will develop faster than expected.  But with all of his experience in wireless, Mike Zafirovski knows better.  The current projections on deployment of solutions, such as LTE, are probably very optimistic.   

Yet, their rhetoric might be less about Nortel’s future in the wireless business and more about separating itself from the space.  As the source article indicates, with the CDMA market starting to peak, the supplier may be bending over backwards to promote 4G in order to entice buyers and investors to leverage the installed base for future growth with the next generation of equipment.  It is also not out the question that Motorola (where Zafirovski was formerly second in command) spinning off its handset business has at least psychologically affected his current thought process.   That perhaps there finally could be the realization that a more targeted market strategy is the way to go.  And as the Seeking Alpha article points out, there will never be a better time to get the most value for its CDMA business.