Swedish telecom company Ericsson is guaranteeing the jobs of about 2,500 Nortel Networks employees -- likely a third of them in Canada -- after winning an auction for the bankrupt company's prized wireless unit with a bid of US$1.13 billion.
The proposed sale, announced early Saturday morning, means the Swedish company will acquire Nortel's so-called CDMA and next-generation Long Term Evolution, or LTE, wireless technologies.
The divisions are a profitable part of the former Canadian high-tech giant, which filed for bankruptcy protection from creditors in January and is now selling itself piece by piece to raise as much cash as possible to repay creditors as it winds down its business after more than a century of operations.
Nortel said it will seek Canadian and U.S. court approvals of the proposed sale to Ericsson at a joint hearing Tuesday. If the deal is approved, the company hopes to close the transaction later this year.
Nortel said Ericsson will offer jobs to a minimum of 2,500 Nortel employees, which makes up the bulk of the wireless division's North American workforce.
The Saturday statement did not say how many employees worked for the Nortel businesses being sold, but past bids pegged that total at 2,500, including about 1,000 at the company's Ottawa research and development centre.
Nortel employs about 25,000 people overall at its wireless, phone equipment and network infrastructure units.
Despite the Ericsson guarantees, it's possible there will be some job cuts in Canada, likely in Ottawa and at Nortel's head office in the Toronto area. In a rival bid for the wireless division announced last month, Finnish-German company Nokia Siemens Networks had guaranteed about 800 Canadian jobs.
Richard Lowe, president of carrier networks at Nortel, said the company's "extremely talented and committed employees have been an integral part of our success in wireless and we are very pleased that so many of them will have the opportunity to continue their innovative work with Ericsson.""
Mike Zafirovski, Nortel's president and CEO, applauded Ericsson's successful bid in a statement issued just after midnight early Saturday.
The deal "represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders," he said.
"Nortel remains focused on finding the right buyers for our other businesses while continuing to maintain excellent customer service levels."
"We are determined to maximize value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible. With today's agreement and through the anticipated sales of the company's other businesses, Nortel will leave its mark on the industry for decades to come.""
The chief executive of Ericsson, one of the world's major wireless equipment and cellphone companies, expressed satisfaction with the result, saying it brings "together leading-edge wireless innovation" from two top telecommunications suppliers.
"We at Ericsson look forward to integrating Nortel's products and talented employees into our business and realizing the full potential of our combined strengths," Ericsson CEO Carl-Henric Svanberg said.
Friday's announcement ends the first step in a high-profile effort by several international bidders to acquire one of Nortel's key divisions. Other bidders in the auction, carried out all day Friday at the offices of Nortel's lawyers in Manhattan -- were New York-based private equity firm MatlinPatterson, a major Nortel bondholder, and Nokia Siemens Networks.
Last month, Nokia Siemens had announced a so-called stalking horse bid for Nortel's wireless division, a US$650 million offer that set the floor price for potential buyers.
The deal still must be approved by a bankruptcy court judge in both the U.S. and Canada next week, as well as the federal government. It must also face any stakeholders who might object to the buyer.
So far, the biggest objections have come from BlackBerry-maker Research In Motion (TSX:RIM), which wasn't part of the official auction, but made an informal US$1.1 billion bid.
The company was shut out when it objected to Nortel's bidding process, though it promised to continue its fight for the assets.
Some have speculated that RIM may try to partner with the winning bidder before the wireless sale closes.
The wireless division includes older CDMA and newer LTE wireless businesses, as well as valuable patent rights which are reportedly of particular interest to RIM because they centre on technologies that could be used to expand video and interactive services on wireless devices such as the BlackBerry.
Nortel could face further challenges from the federal government over concerns about foreign ownership, or any other bidder or stakeholder who considered the auction to be unfair.
Finance Minister Jim Flaherty gave support Friday for RIM co-CEO Jim Balsillie's quest to acquire Nortel assets.
"I think he's a great Canadian and I think he's entirely right to ask for the government to be concerned about the issue," Flaherty said in Toronto, where he was attending a public event.
"What we want to see is a level playing field, we don't want to see anyone excluded from the process with respect to the sale of the assets of Nortel."
Flaherty said it's up to Industry Minister Tony Clement to make any ultimate decisions. The federal government will review the deal under the Investment Canada Act and will require some guarantees from Ericsson that the sale will benefit Canada in terms of employment, research and development and capital spending commitments.
Clement has indicated he wouldn't intervene in Nortel's auction, but that he hoped Nortel would meet with RIM executives to discuss a compromise.
RIM has gained plenty of attention with its argument that a foreign buyer could endanger national security.
Toronto-based Nortel was once North America's biggest maker of telephone gear, but was battered by the recession and a downturn in its market that derailed a restructuring effort begun by Zafirovsky when he was hired away from Motorola Inc. (NYSE:MOT) four years ago.
Since its peak a decade ago, Nortel's workforce has shrunk from about 96,000 to 25,000 and the company lost tens of billions of dollars. Besides its telecom market woes, the company was also dragged down by an accounting scandal that nearly wiped out its stock price and led to criminal fraud charges against its former CEO and other executives.
In an industry that saw rivals Alcatel and Lucent consolidate and new Asian competitors eat into its markets with lower-cost equipment, Nortel stayed independent but couldn't survive as a stand-alone company.
Representatives from Nortel and Ericsson will hold a conference call for media and analysts on Monday at 10 am EDT.
