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Nortel Intensifies Business Unit Breakup

Toronto is one hot destination these days for communications companies and hedge funds looking to pick up a high-tech operation on the cheap. Prospective buyers are picking through Nortel Networks, which announced additional financial woes Monday, but Canada's high-tech jewel hasn't lowered its prices enough to make a deal yet.

In bankruptcy proceedings since January, Nortel's CEO, Mike Zafirovski, indicated the company has been dividing up its units into standalone operations. The company, however, is holding firm on its effort to maximize value for its stakeholders -- creditors, customers, and employees -- Zafirovski declared in a statement.

"Work is well under way to evaluate the ultimate path forward for our businesses," said Zafirovski. "Discussions are taking place with various external parties. However, decisions have not been taken and we continue to evaluate our restructuring alternatives. To provide maximum flexibility, we are also taking the appropriate steps to complete the move to standalone businesses."

Potential purchasers making the trek to Toronto to evaluate Nortel's business units include Avaya, Gores Group, Nokia, Siemens Enterprise Communications, Siemens Networks, Silver Lake, and TPG Capital, according to various media reports.

"We have had discussions with external parties," Zafirovski said in a communication to Nortel employees. "The simple fact is that no decisions have been made at the present time."

In its first-quarter report Monday, Nortel announced that its revenue fell 37% to $507 million from the first quarter in 2008, while revenue dropped to $1.73 billion.

While there wasn't much positive news to report, Zafirovski did say that Nortel's revenue and cash balance have stabilized, indicating the company isn't under severe pressure to conduct a fire sale of its operations. Zafirovski noted that the company's customers, including the International Nortel Networks Users Association, are supporting the company as it seeks to stabilize.

Nortel said it's evaluating its carrier networks unit (which includes its wireless networks unit, carrier VoIP, and application solutions) with an eye to moving to standalone businesses. Other units cited include its metro Ethernet networks, enterprise solutions, and its LG-Nortel joint venture.

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