Nortel’s High Stakes Auction Heats Up

by Matt Klassen on June 20, 2011

After a two year selloff of its businesses, technology, and other assets, the now defunct Nortel Networks is finally coming to the end of its long post-bankruptcy road. In fact, come June 27thone week later than originally planned—the last vestiges of the once great telecommunications company will be sold to the highest bidder in a patent auction that has attracted some serious players.

Like a game of high-stakes poker, it was almost a month ago when Google officially started the game, submitting a bid of $900 million dollars for the roughly 6000 patents in Nortel’s extensive portfolio. But in a game where technological supremacy is on the line, it looks like Google’s opening bid was more like a small blind; enough to keep search engine giant at the table, but hardly enough to win the game.

That said, the question that is on everyone’s mind (especially Nortel’s creditors) is, just how high will the bidding go? The answer to which really all depends on who else is coming to play.

Although I first wrote about this auction late last year, it’s taken some time for it to finally come to fruition. In fact, Nortel had originally scheduled the auction for June 20th, a date itself that had to be pushed back a week due to “significant interest” in Nortel’s extensive intellectual property (IP) portfolio.

Like any good gambler, it looks like most of the major players are content to stand pat and observe how their opposition plays, with Google being the first and only company to jump the gun with its initial $900 million bid earlier this month.  While that sum may seem exorbitant to some, Nortel’s IP is a hot commodity in today’s market, with patents—some considerably ahead of their time—covering all major sectors of the technology market.

But aside from Google, who else is playing in this high-stake game of corporate poker? It should come as no surprise to read that Apple has taken a seat, although the technology giant has yet to indicate if it’s actually going to play. It may be mildly surprising to some to hear that both Intel and Swedish company Ericsson AB have come to play, yet again neither has yet to place a bid. To round out the current four players seated at Nortel’s table is relatively unknown patent risk solutions provider RPX, perhaps the dark horse in this game.

There have been rumours that in addition to these four confirmed bidders that Research in Motion is also considering placing a bid, but with its slumping stocks and cadre of disgruntled investors, it may not have enough money to play in the big game.

So just how high could the bidding get? It really all depends on how much these players want to keep the IP portfolio from their competitors. In fact, based on the importance of Nortel’s patents, analysts are predicting that it will likely take a bid of over $1 billion dollars to secure the portfolio, with some going further to predict that should a bidding war ensue, the final price could reach almost double Google’s initial bid, somewhere around $1.5 billion. 

In the end, it remains to be seen who will stand on Nortel’s shoulders to achieve a decisive victory in the technology market, as about all we really do know is that come June 27th Nortel will officially cease to exist, seeing the last of its assets sold as it comes to the end of its long journey through insolvency.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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