Nortel: What I'm Watching ForNortel: What I'm Watching For

Today, the fate of Nortel Enterprise Solutions will be decided--possibly.

Today, the fate of Nortel Enterprise Solutions will be decided--possibly.Developments in the previous bankruptcy auction of Nortel's wireless units showed that when the gavel comes down, the bickering begins (or continues). Ultimately, none of the squabbling appears likely to change the results of the wireless auction, but there's at least some reason to expect things may not be settled for Nortel Enterprise at the end of today.

To start with what we know, and what we don't know: Avaya's stalking horse bid of $475 million is where things begin. We know at least one other bidder is in, and this has been widely reported to be Siemens/Gores Group, though the company has not confirmed this. It's been reported that there are only two bidders--i.e., Avaya and Siemens/Gore--but I haven't seen anything that definitively states this. The Verizon court papers cited yesterday state that "Verizon understands that a second bidder for the Debtor's Enterprise assets has qualified to participate in the auction," but this does not necessarily mean that only one other bidder has qualified.

Remember what Verizon's goal was in this motion: They were trying to compel Avaya to submit to a deposition in this matter of rejected contracts, and to make this case, they were trying to show that they weren't imposing an undue burden on Avaya and the court. Verizon was making the point that Avaya could lose out in the auction, thereby eliminating the need for a deposition. To make this point, all Verizon had to show is that someone else was bidding. Who or how many isn't particularly relevant to Verizon's motion.

The upshot is that there's no definitive statement about who or how many are bidding, at least that I've seen.

So what I'm watching for is:

* (Obviously) Who wins? An Avaya victory is the scenario most likely to prolong the Nortel Enterprise saga, because Siemens or another party could well decide to pursue the anti-trust issues that have been raised, delaying or potential blocking the closing of the sale to Avaya.

If Siemens wins, presumably there won't be anti-trust issues, but who knows whether Avaya would try to find some recourse?

If someone else is in and wins--well, who knows?

* How much? One scenario is that Siemens doesn't try to outbid Avaya, preferring to go the block-the-deal route. In this case, the sale price could be close to the $475 million stalking horse figure. Or Siemens and/or another party could bid up more aggressively, pushing the price towards (but probably not up to) $1 billion.

One thing to note is that the sale price isn't the end of the expense here. As Allan Sulkin wrote earlier this week, the winner will have to absorb other costs, and this could be a pretty substantial figure.

* What Next? Once the sale is completed--whenever that is--the buyer will have to decide the fate of Nortel's voice products, its data networking products, and all the associated channel and support issues.

What do you think is going to happen today?Today, the fate of Nortel Enterprise Solutions will be decided--possibly.