Nemertes Impact Analysis:

Avaya To Purchase Nortel: Is This The Final Chapter?

Nortel Networks announced plans to sell its enterprise communications business to privately held Avaya, writing the final chapter in the staid history of one of the oldest and largest telecommunications system vendors, or not? Even this chapter isn't complete. Nortel has actually agreed to accept Avaya's bid via a stalking horse auction, but others can still out-bid Avaya for Nortel's assets.

For Avaya, this move is all about market share. If it is ultimately successful, Avaya gains Nortel's large install base, its professional services organization, and its partnership with Microsoft (NASDAQ:MSFT). But others such as privately held Siemens Communications and private equity firms may not back down, creating further uncertainty for Nortel's customers and channels.

Impacts:

Enterprises: As we previously suggested, Nortel customers should hold tight until any sale is final, but continue to evaluate aggressive competitive offerings for alternative systems.

Vendors: Now is the time to aggressively go after Nortel's installed base, though as we have previously noted, don't expect a spending binge anytime soon.

Investors: Watch reaction from Alcatel-Lucent (NYSE:ALU), Aastra (TSX:AAH), Cisco (NASDAQ:CSCO), NEC (NIPNF.PK) and ShoreTel (NASDAQ:SHOR), and privately held Siemens Communications.

Irwin Lazar, Vice President, Communications Research

http://online.wsj.com/article/BT-CO-20090720-708867.html

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