Surprise Surprise – Avaya’s Bid for Nortel Raises DOJ Concerns.

by Jeff Wiener on August 27, 2009

surprise(1)It seems that the DOJ (Dept of Justice) has received a notice of complaint regarding Avaya’s proposed acquisition of Nortel’s Enterprise assets. First of all, kudos to the guy who filed the complaint – an individual by the name of Jim Goebel. This has obviously raised his corporate and personal profile. Maybe I should write a letter to the DOJ proclaiming the merits of the acquisition, post the letter on this blog, and then wait for the personal and corporate publicity. I’ll give that some thought.

In the meantime, how much merit would there be in such a complaint ? If, for example, there were multiple competing offers for Nortel’s Enterprise assets, all equal in scope and dollar, then perhaps it might make sense to look into whether this acquisition might be uncompetitive. To date, there are no other offers. Nortel has been in bankruptcy since January, and they have received ONE offer for their enterprise assets.

Next, let’s look at the potential buyers of Nortel’s enterprise business. I read an interesting blog on the CPE market share written by NoJitter.com earlier this week. According to the market share report, the top five companies in the Telecom CPE space are:

Cisco = 20.9%
Avaya = 15.4%
Nortel = 11.5%
NEC = 8.3%
Mitel = 8.2%

I picked the top five as the next tier includes Digium, Toshiba, and Panasonic. Toshiba and Panasonic are large companies, but, probably not interested in Nortel’s Enterprise business.

It would seem that any of the top five vendors (really four if we exclude Nortel), would catapult that vendor to the number #1 spot (or almost). Effectively, any of the top four acquiring Nortel would be uncompetitive and open to complaint.

Maybe it makes sense for someone like Home Depot to acquire Nortel. That wouldn’t be uncompetitive – would it ? Monopolistic? Maybe they are interested in such an acquisition ?

This complaint reminds me of Jim Balsillie’s offer for the Phoenix Coyotes NHL team. The NHL doesn’t want Jim Balsillie to purchase the Coyotes, and no other suitable bidder has come to the table, so, the NHL makes their own offer for the team. Hmmm – maybe Jim Balsillie should make an offer for Nortel as well. Maybe the DOJ should purchase Nortel.

For goodness sakes, there are no other bidders. Let’s wait until someone else comes to the table (Siemens/Gore, Mattlin Patterson perhaps) but until then the DOJ should leave this alone. Delaying this will only lessen the value of the asset being sold.

Now, I just have to craft my DOJ letter:

Dear DOJ:

I have a complaint …

Come back tomorrow to read the rest !

Jeff www.digitcom.ca

Previous post:

Next post: