Nokia Siemens is acquiring a major part of Canadian telecom giant Nortel Networks' CDMA and LTE Access business for $650 million.

Nortel is also talking to others to sell its optical networking, enterprise and wire line communication gear.

Once the largest company in Canada, Nortel had sought bankruptcy protection in Canada, the US and Europe in December 2008 after losing nearly $7 billion since 2005, bogged down with a $6.3 billion debt and a $2.8 billion deficit pension fund. (See: Nortel files for bankruptcy protection in Canada, US and Europe)

With the ongoing global economic slowdown, Nortel has found it difficult to sell its assets although Nortel president and chief executive Mike Zafirovski, hired in 2005 to turn the company around, said an orderly sale of company assets was the best way to preserve value.

The 127 year-old Nortel had reportedly rejected an earlier $850 million offer from Nokia Siemens for the wireless business and some parts of the Nortel wire line communication gear business in March, since Nokia Siemens offered to absorb only a small number of Nortel employees.
This time around, Nokia Siemens, a joint venture of Nokia of Finland and Siemens AG of Germany, is prepared to absorb more than 2,500 Nortel employees, mainly those located in Ottawa in Canada and Dallas in the US, and employees in Mexico and China.

Approximately 400 of those employees are specialists in LTE research and development, and would help Nokia Siemens Networks to enhance innovation and strengthen the European company's position in LTE, where it is already working with customers such as NTT Docomo in Japan.
At one time Nortel had over 90,000 employees on its payroll, since reduced to about 30,000.

Nokia Siemens has pulled of a coup by acquiring Nortel's profitable CDMA business, which generated $10 billion in sales or about 40 per cent of Nortel sales last year and would bef up Nokia Siemens Networks' presence in North America, making it a leading supplier of wireless infrastructure products in the region.

"This agreement provides an important strategic opportunity for Nokia Siemens Networks to strengthen its position in two key areas, North America and LTE, at a price that makes good economic sense," said Simon Beresford-Wylie, chief executive officer of Nokia Siemens Networks.

"It also represents stability for Nortel's existing customers and offers a great opportunity for employees to move into a stable future with an industry winner. The R&D organization in Canada would become a long-term wireless center of excellence within Nokia Siemens Networks, complementing our other global sites," he added.

However, the Nokia Siemens offer to acquire part of the assets of Nortel will come under the court auction process and it will be binding on Nortel to sell to the highest bidder.

Under the bankruptcy law, Nortel has to look for the best offer in order to pay its debt, which has since come down to $4.5 billion and $2.8 billion owed in the pension fund.

Canada's government-owned export credit agency, Export Development Canada (EDC), is supporting this transaction with a $300-million loan commitment.

The company aggressively cut costs by restructuring four times in three years, and in November, had laid off 1,300 employees after reporting a $3.4-billion quarterly loss.

In the first-quarter of this year, Nortel reported a net loss of $507 million as revenue declined to $1.73 billion.

Once Canada's largest company and a technology giant, Nortel's share price was at a high of C$1,100 in early 2000's, and its valuation had pluhged from $250 billion to a mere $194 million today .

In 2001  Nortel was hard hit first by an accounting scandal. Today, with the global financial crisis, there has been a scaling back of capital spending by some of its biggest wireless customers, including Sprint Nextel, the third-largest US mobile network operator.

The company had also been struggling to make itself viable as its competitors like Alcatel-Lucent and low cost vendor, Huawei Technologies flourished with newer technologies while Nortel was still selling outdated ones.