What About Nortel’s Metro-Ethernet BU?

As Nortel gradually divests itself of its business units, one we haven’t heard much about is Metro Ethernet Networks (MEN) operation.

The early line had the MEN business unit going for as much as $750 million. That still might happen, but I’m skeptical, even doubtful.

As time ticks ever forward — it doesn’t go backward, as far as we know — Nortel’s MEN unit is a depreciating asset, one that doesn’t benefit from being awash in uncertainty. When a company has signaled its intent to sell off its operational business units, customers tend to be wary about making further investments in its products and services, understandably concerned about the ultimate disposition of the company and the future plans of its new ownership.

That’s why I think there’s an inverse relationship between the time it takes to arrange a sale of the MEN business unit and the amount of compensation Nortel eventually will get for it. The longer it takes to line somebody up, the lower the price Nortel will receive.

Compounding the problem for Nortel is that a couple potential bidders seem to have eliminated themselves from contention.

Ericsson, now that it seemingly has bagged Nortel’s wireless business unit — barring a belated intervention or reversal by the Canadian federal government — has signaled, at least for now, that it has no interest in other Nortel assets. Ericsson was considered a favorite to claim Nortel’s MEN unit.

Tellabs also has pulled out of the running. It was considered a potential acquirer of the MEN business.

The companies still seemingly in the MEN bidding derby, in descending order of probable serious intent, are Ciena, Sycamore, Juniper, and Alcatel-Lucent,

I can’t envision Cisco or Huawei getting involved, for very different reasons. Cisco probably has little or no interest, whereas Huawei, even if it had interest, would probably never get through the approvals process.

At this point, though, nothing much seems to be happening. That can’t be a good omen for Nortel’s creditors.

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