Nortel suspends plans to sell Metro Ethernet unit

Thu Feb 5, 2009 12:01am EST
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By Wojtek Dabrowski

TORONTO (Reuters) - Ailing telecom equipment maker Nortel Networks Corp has suspended its plans to sell its Metro Ethernet Networks (MEN) unit as it begins its restructuring under bankruptcy protection.

"The previously announced potential MEN divestiture has been put on hold while the overall business plan is being developed," spokesman Mohammed Nakhooda told Reuters on Wednesday.

Analysts had speculated the division, which includes Nortel's optical and carrier ethernet technology, could fetch as much as $1 billion.

The growing business -- which accounts for roughly 14 percent of Nortel's revenue -- was put up for sale in September, but no bids have materialized to date.

Nortel, North America's biggest maker of telecom equipment, filed for bankruptcy protection in Canada and the United States last month, blaming the current economic crisis for derailing a turnaround effort that began in 2005.

It had about $2.4 billion in cash when it sought court shelter from its creditors and about $4.5 billion in long-term debt, according to court documents.

Analysts have said the Toronto-based company will likely have to shed assets at fire sale prices as it fights to survive. The suspension of the MEN sale signals such moves may be very difficult to complete given the weak economy.

That's because rather than spending on acquisitions, potential buyers may opt to hoard cash as they face the downturn.   Continued...