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Avaya grabs Nortel's telecoms biz for $900m

Staves off Siemens

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Avaya has won an auction for Nortel's enterprise telecoms business, beating out rival bidder, Siemens Enterprise Communications.

The company will pay $900m cash for the unit, nearly double the $475m it initially offered during so-called stalking horse bidding as part of Nortel's bankruptcy-court proceedings. Avaya will also pay an additional $15m for an employee-retention program.

Nortel filed for bankruptcy protection in January after years of losses and an accounting scandal. Nortel sold its wireless business to Ericsson in July for $1.13bn following a similar process.

Avaya was forced to sharply raise its offer after Siemens entered the formal bidding. Also included in the sale are Nortel's shares in Nortel Government Solutions Inc. and DiamondWare Ltd.

"Our successful bid brings us closer to adding Nortel and its complementary channel, portfolio, research and development, and global presence to Avaya," Avaya's chief executive Kevin Kennedy said in a statement.

"It is our intention to announce an integrated product and services roadmap as soon as we have these items identified through a thorough integration process. At this time, we cannot speculate further on details."

Last week, Verizon said it was ready to oppose the sale, citing national security concerns, if Avaya wouldn't agree to take up existing Nortel contracts. Verizon buys and resells Nortel kit to branches of the US government, including Congress, the military, and anti-terrorism agencies. Avaya said it is in talks with Verizon to reach a resolution.

Avaya aims to close the sale within the fourth quarter, subject to approvals from courts in the US, Canada, France and Israel as well as regulatory clearances and other conditions.

Nortel will seek Canadian and US court approvals at a joint hearing on September 15, 2009. In some EMEA jurisdictions, the transaction is subject to consultation with employee representatives. ®

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