Nortel sells off network access division

Nortel Networks Corp. on Monday continued its shrink-towards-profitability strategy with the sale of network access assets to Concord, Ont.-based Aastra Technologies Ltd.


deal includes a payment by Aastra of US$21 million, and as much as an additional US$60 million in payments should the CVX division, which was part of Nortel subsidiary, Nortel Networks Ltd., hit specified revenue targets in the next four years. Aastra will also assume liabilities of US$7 million.

Analysts said Nortel’s expected divestiture of its CVX 1800/600 Multi-Service Access Switches, CVX SS7 gateways and network management tools was indicative of the company’s focus on its core optical networking and wireless businesses, including its Passport Packet Voice Gateway (PVG) solution.

“”One of the things that everyone has been talking about is convergence. If you look at what’s going in the enterprise, there is certainly a convergence of networks,”” said Mark Quigley, director of research for the Yankee Group in Canada. “”To do that you have to have packetized voice. It certainly makes much more sense to focus on those areas for going-forward growth.””

The CVX product line is used by Internet service providers to support dial-up remote-access concentration and voice over Internet protocol voice compression. According to Norm Bogen, director of WAN infrastructure and services for In-Stat/MDR in Scottsdale, Ariz., the PVG solution supports broadband as well as narrow-band connections and a higher number of ports per box than the CVX.

“”The remote access concentration business has been declining dramatically because the ISPs have their equipment and its just not growing anymore,”” he said, adding Nortel had been shopping its CVX division for three months. “”I think Nortel did a good thing. On a cost-per-port basis, there’s a better solution out there.””

Bogen suggested anyone that continues in the CVX market is trying to “”milk it”” until demand totally runs out, and noted that Aastra faces competition in the space from the likes of Cisco Systems Inc. and 3Com Corp. While Quigley agreed the future lies in broadband, he said a smaller company like Aastra, which owns the rights to Nortel’s Meridian Business Set Centrex and 8000 and 9000 series desktop phones, is better able to carve out a niche in the CVX market than an albeit shrinking behemoth like Nortel.

“”There is an ongoing business in there,”” he said. “”But is it going to provide the growth that Nortel needs to see? Probably not.””

Quigley predicted Nortel will continue to streamline, either through further layoffs and more division selloffs.

“”The end result is the same,”” he said. “”You reduce head count.””

Quigley said he had heard that the most recent announcement of layoffs will not affect employees in Canada or the United States.

On Thursday, Nortel announced it would slash 4,000 more jobs, the latest in a series of cuts that have seen Nortel lose about 50,000 staff since Jan. 2001. The company also shed front-office solutions provider Clarify last October.

Both Nortel and Aastra were unable to provide comment by press time.

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