Daily Archives: December 2, 2009

NSN Applies Full Court(s) Press in Late Bid for Nortel MEN Assets

As bankruptcy courts ponder how best to respond to the curveball that Nokia Siemens Networks threw at them in the form of an $810-million all-cash offer for insolvent Nortel’s Metropolitan Ethernet Networks (MEN) business, an article over at the Ottawa Citizen provides a good synopsis of where things stand.

As you might expect in any matter involving Nortel, there are elements of melodrama, tragedy, and farce.

Nokia Siemens Networks (NSN), for example, is claiming that it, and not Ciena, submitted the highest bid at auction. According to NSN, its final unconditional auction bid — offered in conjunction with One Equity Partners, a private-equity concern that manages $8 billion in assets for JPMorgan Chase & Co. — was for$770 million in cash.

NSN also said it tried to adjourn the auction to get expert advice on valuing the Ciena debt offer. According to the Ottawa Citizen, Nortel apparently refused the request for adjournment, putting NSN in what it called “an untenable position.”

Said Barry French, an NSN spokesman:

“We can confirm we have notified the representatives of Nortel’s creditors that we are willing to offer $810 million in cash for the optical networking and carrier ethernet assets of Nortel.”

“Along with our expert advisors, we continue to believe that the convertible notes offered by (Ciena) carry significant risk and should not be valued the same as cash.”

NSN is taking its case not only to the bankruptcy courts, but also to the court of opinion constituted by Nortel’s creditors.

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Dell CFO Speaks of Elongated Corporate Refresh Cycle

Dell Inc. is counting on a refresh cycle to wash over enterprise PCs and servers. In recent comments, company CEO Michael Dell has been bullish about prospects for an 18-month cycle beginning in early 2010.

Now, though, a note of circumspection has crept into the comments of Brian Gladden, Dell’s chief financial officer.

While speaking at the Credit Suisse Technology Conference today, Gladden said he expected the holiday season to be “moderately good” for sales of PCs. Of greater interest were the following remarks he made pertaining to the corporate refresh cycle, which Gladden sees spanning everything from “servers all the way through client products.”

Said the Dell CFO:

“Their (enterprise customers) asset base has aged much beyond what they had expected. Our view is sometime next year you will start to see that (refresh) happen.

“We are surprised at how good demand has been over the last few weeks. The hypothesis of a corporate refresh is still alive. It’s just a question of when does that happen and how long. I think you will see an elongated cycle of refresh.”

Elongated. That means “unusually long in relation to its width.” Its synonyms are extended, prolonged, protracted, and stretched. You have been warned.

At least Gladden didn’t invoke the word “attenuated.” Let’s hope that one doesn’t slip out the next time a Dell executive attends an investment bank’s technology conference.

Nokia Siemens Networks Files Late After-Auction Bid for Nortel’s MEN Assets

When somebody in business tells you it’s not about the money, you’d be wise to take those words with a mound of salt as high as Mount Vesuvius.

It’s nearly always about the money, my friends.

That’s why I think Nokia Siemens Networks (NSN) — the conflicted, divided, and potentially schizophrenic telecommunications-equipment joint venture — ultimately will be successful with its late, after-the-fact bid to acquire insolvent Nortel Networks’ Metropolitan Ethernet Networks (MEN) assets for $810 million in hard cash.

Admittedly, this late bid from NSN is a clear and obvious violation of the bankruptcy-auction process prescribed for the disposition of Nortel’s assets. NSN had a fair shot at Nortel’s MEN assets in the auction ring, and it came up short, losing to a $769-million cash-and-notes bid from Ciena.

According to the rules, Ciena won the auction fair and square. It should rightly take home the prize.

Hold on, though. Who said life, much less bankruptcy proceedings, was fair?

This transaction will come down to an exercise in mathematics. The bankruptcy court has rules to follow, but it also has Nortel creditors breathing down its neck. Those creditors want to squeeze maximum value from Nortel’s residual business assets.

The U.S. Bankruptcy Court for the District of Delaware was to decide today whether to approve the Ciena’s deal to acquire Nortel’s MEN assets. Pursuant to an agreement, Nortel would have to pay Ciena about $21 million in breakup fees and expense reimbursements if it chooses another buyer.

That’s why it all comes down to numbers. If I subtract $21 million from $810 million, I arrive at a sum of $789 million. The winning auction bid from Ciena, which comprises $530 million in cash and $239 million in senior convertible notes due in June 2017, tips the scales at $769 million.

Put yourself in the presumably shiny and eminently comfortable shoes of a Nortel creditor. Would you want $789 million in cash (after the $21 million deduction) or a bid of $769 million that includes only $530 million in cash? I think I know your answer.

The bankruptcy judge would need to be a paragon of probity and rectitude to deny NSN’s after-the-buzzer bid. He’d also need to have a thick skin, because the Nortel creditors won’t forget that they had a chance to get more money from a superior offer, even if it did come after the auction was over.

For Ciena, it’s not all bad news. It’s shareholders seem to rejoice every time the company’s bid for Nortel’s MEN assets is imperiled. Today was no exception, with Ciena shares rising on the NSN announcement.

Said UBS analyst Maynard Um, as quoted by the Wall Street Journal:

“We had earlier stated that we would view any price over $600 million as too high and as such we believe that the market is likely to take this negatively.”

The market might take a dim view, but Nortel’s creditors will respond favorably.

Sound and Fury in “Black Screen of Death” Saga

I still don’t know what to make of the “Black Screen of Death.” It was initially thought to have affected millions of WIndows users, but now appears to have a stricken a smaller number, perhaps tens of thousands.

What we do know is that a problem struck a relatively small number of Windows users, including those with Windows 7, and that, for those users, the problem ranged from being an inconvenience to something more serious. Beyond that, we’re still looking for answers.

Prevx, the security-software company that originally identified the affliction, suspected that a recent Windows security update was to blame for the problem, which apparently causes desktop icons and the start menu to disappear from computers, leaving a black screen behind.

Microsoft has countered that malware, and not a security update, was the likely cause of the problem. Prevx has apologized to Microsoft for rushing to judgment with its initial diagnosis, which proved errant, but it also has defended itself from criticisms that it overstated the severity of the glitch.

All in all, recriminations are flying, and lessons should be learned, as PC World’s Tony Bradley notes.

On the Internet, though, everybody wants the scoop, the edge, the time advantage that accrues from identifying or getting to something — a story, a development, or actionable information — ahead of everybody else.

That pressure will ensure that we’ll all struggle — vendors, writers, and readers alike — to sort the wheat from the chaff as we thresh real-time information.

McAfee Maps the Malware World

The mind of the average cyber criminal is dark, devious place. These are people who spend considerable time thinking about how they can deceive you, the unsuspecting Internet voyager, for fun and profit.

McAfee, whose business it is to defend against the misdeeds of online malefactors, has just published its third annual “Mapping the Mal Web,” report, which provides insights into which top-level Internet domains (those suffixes at the end of web address, such as the “.com” and “.edu” designations) are the most frequent and likely harbors for malevolence.

For as long as humans use keyboards as a mechanism for alphanumeric communication, typographical errors will be with us. The Internet’s evildoers try to exploit such human frailty, which is why Cameroon’s domain, “.cm,” has risen to the top of the malware charts. All it takes is rushed keystrokes, and one can easily be transported to an Internet tar pit rather than to a desired destination.

That isn’t to say all “.com” sites are safe havens. McAfee finds that the designation for commercial sites ranks second, behind only Cameroon’s domain, as a source of online risk. Whereas McAfee assigns a weighted-risk ratio of 36.7 percent to Cameroon, it gives “.com” a ratio of 32.2 percent. (You can read about McAfee’s methodology, about the weighed-risk ratio, and about caveats associated with the study at the McAfee website hosting the report.)

The news isn’t all bad. Hong Kong (.hk) went from being the top-level domain with greatest number of risky registrations to an overall risk ranking of 34th in this year’s report. While you should never drop your guard completely while online, McAfee says your safest Internet travels will be among the domains associated with government (.gov), Japan (.jp), education (.edu), Ireland (.ie), and Croatia (.hr).

In considering where to register malicious websites, according to McAfee, scammers and hackers account for the following factors: lowest domain prices lack of domain regulatory control and supervision, and ease of registration.

Online malfeasance is a booming business. McAfee says we should not be surprised:

The evolution of malware delivery toolkits has given even the novice hacker the ability to easily create a fake bank site that challenges all but the most careful consumer to tell the difference. The persistence and proliferation of these phishing sites is in itself proof of this; absent of hacker profitability, phishing would disappear. Likewise, the explosion in the use of social networking sites and communication tools has exposed even more consumers to malware authors.

I suppose one could draw some dark inferences about humanity from the criminality manifested online. Then again, what’s new isn’t the evil, nastiness, and wrongdoing by some people against others. That’s been with us from time immemorial. What’s new, of course, is that the Internet has provided a venue in which certain criminal activities can become anonymized, unprecedentedly stealthy and surreptitious.

What this tells us is that even the best anti-malware can only go so far in providing us with online protection. Many Internet criminals are proficient social engineers. It’s incumbent on us all to rely at least as much on our wits as on our firewalls and anti-virus software.

What follows is a color-coded map, excerpted from the McAfee report, ranking countries according to the relative risk of their Internet domains.

InternetDangerNations2.jpg

Cisco Could Waive Conditions in Protracted Bid to Acquire Tandberg

As Tandberg shareholders glacially and incrementally tender their shares at Cisco’s proposed takeover price of 170 Norwegian crowns per share, the possibility grows that Cisco could waive the requirement that it reach the 90-percent share threshold specified in the terms and conditions relating to the acquisition.

As it now stands, Cisco has received about 84 precent of Tandberg’s shares.

On Tuesday, Cisco extended its offer to December 3, and it said today that the bid would not be extended beyond that deadline. Cisco will announce Thursday whether the condition of 90-percent shareholder approval has been satisfied. If that condition goes unmet, Cisco will decide whether to waive it or to withdraw its offer for Tandberg.

The latter seems an unlikely option. Cisco has gone too far, and gone through too much trouble, to reverse course now.

Nonetheless, it’s a close call as to whether it will attain the share-tender approval of 90 percent. The closer it gets to that mark, even if it doesn’t quite hit it, the easier it will be for Cisco to waive the condition with something approaching impunity.

Getting as close to that mark as possible also would give Cisco negotiating leverage with dissident shareholders. That might become an important factor, because waiving the 90-percent requirement would entail negotiation with any holdout faction of shareholders, thus prolonging the acquisition process. If Cisco must go down that road, it will want it to be a short, paved, smooth avenue leading, at long last, to something resembling Easy Street.

So far, nothing about Cisco’s acquisition’s bid for Tandberg has been easy or smooth. Cisco misread this situation badly, and has struggled mightily to counter the objections and reservations of dissident shareholders who had a clearer understanding than Cisco of the terms and conditions surrounding a Tandberg acquisition.

Cisco has done a lot of acquisitions in its history, but most of those occurred in salubrious economic circumstances, with different M&A personnel at the helm. Also worth noting is that Cisco, even in its glory days, typically refrained from acquisitions of this size.

Moreover, the company never has done a multibillion-dollar acquisition in Europe. At the current valuation of its raised offer, Cisco will pay about $3.4 billion in its foreign cash reserves for Tandberg.

Although I’m sure Cisco has grand aspirations for Tandberg as a property that will help it develop and grow the market for pervasive videoconferencing, Cisco’s current team of M&A wheeler-dealers is unlikely to have fond memories of Norway.