Saturday, July 25, 2009

Nortel Wireless Unit Sold to Ericsson for $1.13B

It was announced this morning that Ericsson will buy the wireless unit of Nortel for $1.13B, beating bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC. The wireless unit includes the CDMA and LTE (Long Term Evolution) product lines and technologies. The latter is key for Ericsson as the technology is expected to greatly expand in North America.

Out of the three bidders, Ericsson was the most surprising winner as it does not have a significant CDMA business. It is thought that whay they really want is the market for evolution of CDMA into LTE, as well as not allowing its big competitor Nokia get a foothold in North America. For this reason, it is a tremendous win.

Also key to this whether the Canadian government will approve the transaction as it is the least likely to keep Canadian jobs.

"Licensing LTE technology to handset makers may be worth as much as $2.9 billion in royalties during the next 15 years, based on Nortel’s own predictions, JP Morgan Securities said last month."

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