Cost-Cutting Sonus Ponders Bid for Nortel VoIP

Even as it dumps employees in the USA and ramps up its lower-cost operations in India, Sonus reportedly is interested in pursuing Nortel’s carrier VoIP assets.

It makes sense, if only from a market-consolidation angle. Sonus could benefit from buying the accounts and pushing its own products into them. It would also benefit from gaining Nortel’s VoIP technologies, but not as much as some observers suppose.

Not surprisingly, price will be a critical determinant in whether Sonus’ ardor for Nortel’s VoIP assets will remain passionately hot or will go as cold as an investment banker’s heart.

I have read reports and heard scuttlebutt that Nortel’s VoIP assets might go at court-ordered auction for as much as $1 billion. Perhaps that’s just tremendously wishful thinking from Nortel’s stakeholders. Regardless of provenance, that sort of speculation should give Sonus pause. The company should not, and probably will not, pay such a prohibitive price.

If you read the transcript of Sonus’ recent conference call with investment analysts, you’ll see more ambiguity, evasion, and misdirection than you’d find in good murder-mystery novel. The company is struggling to remain foremost of mind with many of its carrier customers, and many of those customers aren’t as financially healthy as they’ve been in years past.

Those circumstances explain why Sonus is cutting staff and transferring engineering work to India, where it can benefit from lower costs.

With that in mind, can Sonus really afford to splash out relatively big money for a piece of Nortel that won’t give it a lasting game-changing advantage?

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