Category Archives: Private Equity

Ciena’s Tweaked Terms Deliver Victory Over Desperate NSN for Nortel’s MEN Assets

On the surface, it appears that the bankruptcy judge presiding over the kerfuffle between Nokia Siemens Networks (NSN) and Ciena for the privilege of owning Nortel’s Metropolitan Networks (MEN) assets made his decision purely on legal and procedural grounds.

Then again, maybe not.

As reported by Bloomberg, U.S. Bankruptcy Judge Kevin Gross who is overseeing the liquidation of Nortel’s U.S. assets, ruled yesterday that NSN’s $810 million after-the-buzzer offer should be rejected.

Ciena, which formally had submitted the top auction bid of $759 million in cash and convertible notes, argued successfully that it already had begun work on combining the two companies subsequent to the November 22 auction.

Nortel had sided with Ciena in the post-auction fracas, asserting that allowing a bid after the conclusion of the auction would disrupt the sale of the company’s remaining assets – not that there are many in the corporate garage left to sell.

Even though the $810-million bid from NSN was too late, it wasn’t too little. At face value, and even taking into account a $21-million compensatory breakup fee Nortel would have been obligated to fork over to Ciena, the NSN bid appeared to represent a better deal for Nortel creditors.

What’s interesting is that the Ciena offer appears to have been tweaked yesterday in a hallway outside the courtroom. Quoting from a Reuters article:

That set up Wednesday’s fight in court, with Nokia Siemens and some creditors arguing the auction should be reopened, in part because Ciena’s convertible securities were overvalued.

After roughly seven hours of argument, testimony and cross-examination, Nortel’s attorney said his team had a reached a deal in the hallway outside the court that would lead to the withdrawal of the last major objection.

Withdrawal of the objections made that a near-certainty later on Wednesday.

U.S. bankruptcy court in Delaware and a Canadian court cleared the deal after simultaneous hearings, Ciena and Nortel said in separate statements.

To clear the last objection, Ciena agreed to change the pricing on its convertible securities under certain conditions.

“This increases the value to the estate,” said Jennifer Feldsher, an attorney with Bracewell & Giuliani, which was representing creditor Matlinpatterson Global Investors. “We withdraw our objection.”

Ciena’s pricing change to the convertible securities included in its bid appeared to represent a modification of its formal offer. The move triggered the ire of an attorney representing Nokia Siemens Networks. Quoting again from the Reuters report:

Nokia Siemens’ attorney, Gregg Galardi, was critical of the deal saying it appeared to allow Ciena to change its bid and Nokia Siemens should be allowed to as well.

“It sounds like there is a material change to the bid,” Galardi of Skadden, Arps, Slate, Meagher & Flom said. “If that doesn’t reopen the auction, I don’t know what does. We stand by that $810 million bid.”

Was it a material change to the bid? If so, would it have been grounds to reopen the auction?

Don’t ask me. Those are legal questions, and I have difficulty distinguishing torts from tarts. However, I do welcome the learned opinions of the razor-sharp legal minds that frequent this blog occasionally.

That debate might be fun to have, but it would be entirely academic. NSN has conceded defeat, and Ciena is getting Nortel’s MEN business, even if the stock market and many of its shareholders wish otherwise.

As for NSN, the joint venture between Nokia and Siemens seems as confused and conflicted as ever, even if its new CEO is talking a big game about his plans for market-share gains and world domination.

Putting aside yesterday’s courthouse dustup, how could NSN fail to put its best collective foot forward during the actual auction process? How badly disorganized does the company have to be if it can’t be ready with its auction strategy before and during, you know, the actual auction?

I wrote before that the timing didn’t favor an NSN bid for Nortel’s MEN assets. Even though NSN scrambled in conjunction with private-equity concern One Equity Partners, which manages $8 billion in assets for JPMorgan Chase & Co., it is now evident that this was a last-minute, slapdash effort. It makes one wonder about the strategic coherence behind everything else that NSN is cobbling together.

Meanwhile, we read that Siemens today took an impairment charge of €1.634 billion for its continued involvement with NSN. Considering that Siemens AG has reduced its direct exposure to information technology, and that it has said IT is “not a great place to be,” one might question how long it will continue to take charges on a joint venture that seems strategically misaligned with its own big-picture objectives.

My supposition is that the recent emphasis on expanding and extending NSN into cleantech and renewable-energy solutions might have been, at least partly, a concession to Siemens, which has a large energy-related business and considerable expertise in that area. At its core, though, NSN remains a telecommunications concern, and that’s not where Siemens sees its future.

Seemingly flailing and swaggering at the same time, NSN lurches unsteadily into an uncertain future.

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.

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.

Lenovo Buys Back Lenovo Mobile to Reenter Chinese Handset Market

Lenovo is getting back into the mobile-phone business in China, according to the Wall Street Journal. One has to wonder whether that was the plan all along.

In 2008, Lenovo withdrew from the handset market, selling Lenovo Mobile for $100 million to group of investors led by Lenovo Holdings Ltd., the private equity arm of Lenovo’s parent, Legend Holdings Ltd. Back then, the rationale for the divestiture was that Lenovo wanted to place singular emphasis on its execution in the personal-computer business.

Then and now, though, Lenovo had to realize that the handset market in China would be a fast-growing, potentially lucrative market for many years to come. Run as a separate entity, Lenovo Mobile prospered, now ranking third by unit shipments in China’s mobile-handset market.

What’s more, Lenovo Mobile apparently got its financial house in order after leaving the official Lenovo fold. That’s one of the reasons Lenovo has decided to buy it back with for $200 million in cash and shares sourced from “internal resources.” The main reason, of course, is that the Chinese cell-phone market is an ever better place to be now than it was in 2008, which — even for the those afflicted with attention-deficit disorder — wasn’t that long ago.

Lenovo has a prototype mobile Internet device (MID) in the works, and Lenovo-branded handsets will be released shortly. Again, it makes one wonder whether the spin-out-to-spin-in strategy wasn’t in the playbook from the outset.

Cisco Surfaces in Transcribed 9/11 Pager Messages

At CBSNews.com, Declan McCullagh reports that pager transcripts, apparently documenting messages sent during the events of 9/11, have been posted at WikiLeaks.org.

As McCullagh notes, the pager logs seem to represent messages transmitted on September 11, 2001, through the networks of Arch Wireless, Metrocall, Skytel, and Weblink Wireless. It’s not clear how the transcripts were obtained, but over-the-air interception is strongly suspected.

From an information-technology perspective, the most intriguing message is one allegedly sent at 4:18pm by Jim Massa, then Cisco’s director of federal operations, to Charlie Giancarlo, then Cisco’s chief development officer and now with private-equity firm Silver Lake, which recently claimed an ownership stake in Skype.

Here’s an excerpt from McCullagh on the Cisco-related exchange:

Whatever their origin, the logs are likely to raise more questions than they answer. Take this intriguing message that was sent by Jim Massa, then Cisco’s director of federal operations, at 4:18 p.m. It said: “NEED TO DISCUSS FBI TEN THOUSAND UNIT REQUIREMENT ASAP.” The recipient appears to be Cisco Chief Development Officer Charlie Giancarlo, who left the company in 2007 and now works at a venture capital firm in Menlo Park, Calif. called Silver Lake.

A Cisco representative said in e-mail to CBSNews.com: “I know we worked closely with law enforcement after the attacks but I don’t have any specifics.” Massa did not immediately respond to a request for comment.

One possibility is that the FBI urgently needed routers or other Cisco gear to upgrade its own network. But technical experts that CBSNews.com contacted believed it’s more likely that the FBI was working with Internet service providers to reconfigure their networks with Cisco hardware to allow wiretaps to be conducted more readily. Around that time, Cisco was beginning to develop wiretap capabilities for its routers — a concept that eventually became known as “lawful intercept.”

Jim (or James) Massa now runs Loom Enterprises, a consultancy that allows “synergistic relationships to be formed between individuals, businesses, educational institutions, governments as well as faith-based and non-faith-based non-profit organizations.”

We’ll seen whether McCullagh can learn more about the FBI’s urgent “ten-thousand unit requirement.”

Ciena Gets Nortel’s MEN; NSN Faces Uncertainty

Now that Ciena has claimed Nortel’s Metropolitan Ethernet Networks (MEN) business assets, which include optical- and Ethernet-networking products and technologies, questions linger about what exactly transpired and what happens next.

Ciena’s winning bid was worth $769 million, about $248 more than the stalking-horse bid it submitted in October. Comprising $530 million in cash and $239 million in senior convertible notes due in June 2017, Ciena’s bid topped an indeterminate offer put forward by ambivalent Nokia Siemens Networks (NSN), which did its best afterward to rationalize why it didn’t come away with the auction prize.

The big winners in this auction are Nortel employees. About 85 percent (2,000) of Nortel’s MEN personnel will join Ciena, presuming the deal clears regulatory hurdles. The transaction must receive court approval in the United States and Canada, which it expects to get at a joint hearing December 2, as well as in France and Israel.

Based in Linthicum, Md., Ciena practically doubles in personnel as a result of the acquisition. It also gains about 1,000 new customers spread across 65 countries. Included among those new customers are carriers AT&T Inc., Verizon Communications Inc. and Comcast Corp.

Ciena says the deal will be “significantly accretive” to its operations in fiscal 2011. As noted by the Wall Street Journal, Nortel was a leader in developing 40 gigabit optical-networking equipment, allowing carriers to quadruple their network capacity without incurring much additional cost. It is also among the industry leaders developing the next-generation 100-gigabit optical-networking technology.

But the past tense of the preceding paragraph is notable. Like the rest of insolvent Nortel, the MEN business has struggled under the purgatory of bankruptcy protection. For the first nine months of this year, Nortel’s MEN business reported revenue of $988 million, down 21% from a year earlier. Results have been gradually worsening. In the latest quarter, Nortel’s MEN revenue fell 26 percent to $295 million in relation to the corresponding quarter last year.

While the market for carrier-Ethernet gear continues to grow, even during a downturn that has inhibited expansion in most carrier-related market segments, competition is fierce. Infonetics expects the market for carrier-Ethernet equipment to reach $34 billion by 2013, growing from $17 billion in 2008. Nonetheless, competitors including Huawei, Alcatel-Lucent, Ericsson (Redback), ZTE, and Extreme Networks. The added scale that Nortel brings to Ciena will help, but it doesn’t guarantee success.

Besides, as many analysts have noted, Ciena and its executive team have no experience integrating an acquisition of this size. Any student of technology acquisitions will tell you that more is likely to go wrong than to go right, especially when the team managing the integration hasn’t had the benefit of previous experience in similar circumstances.

Still, there’s no question that Ciena’s leadership is confident of being on the right track and will do its best to leverage what Nortel’s MEN assets offer. The same cannot be said for Nokia Siemens Networks (NSN), the Swedish-German joint venture that finds itself back in limbo after this auction. Having already fallen short of the mark in a bid for Nortel’s wireless assets, ultimately captured by Ericsson, NSN now has been a two-time loser in the Nortel auctions.

Bidding this time in conjunction with private-equity firm One Equity Partners, Nokia Siemens Networks (NSN) was at pains to justify its failure to overtake Ciena in the MEN auction ring. In a terse statement posted on its website, NSN said the following:

Nokia Siemens Networks confirms that, with its financial partner, it did not submit the highest bid for Nortel’s optical networking and carrier Ethernet assets in the bankruptcy court-sanctioned auction that began on Friday morning and extended through the weekend. Nokia Siemens Networks believes that its final offer represented fair value for the assets, and further bidding could not be financially justified.

It’s possible that the auction bid for Nortel’s MEN assets was something of a Hail Mary pass for the joint-venture partners. Now that it has fallen incomplete, Nokia and Siemens are likely to reconsider their commitments to the venture. Many think Siemens will want out of the arrangement. Meanwhile, Nokia might not have the fortitude or resolve to buy out its partner’s stake in the company. There’s a reasonable possibility that the joint venture might seek another partner or put itself for up for sale completely.

As for Nortel’s creditors, they must be pleased. At the end of the auction, they received a winning bid that was nearly a quarter-billion dollars more than the initial stalking-horse offer from Ciena. It wasn’t quite the $1.13-billion payday they derived from the sale of Nortel’s wireless assets to Ericssson, nor the more than $900 million they got from Avaya for Nortel’s enterprise business, but it wasn’t bad.

Gradually running out of assets to sell, Nortel is expected to make an announcement about the sale of its Global System for Mobile Communications (GSM) business later this week.

NSN Gets Private-Equity Help for Counteroffer to Ciena’s Bid for Nortel MEN Assets

For a long time, it appeared Ciena might go unopposed in its quest to gain ownership of insolvent Nortel Networks’ Metropolitan Ethernet Networks (MEN) assets.

Adhering to the rules of the Nortel auction process, Ciena set the pace with a stalking-horse bid of $390 million in cash and 10 million in shares. Although the share component of the bid has varied in value, the Ciena proposal would have been worth $526 million at the close of trading yesterday.

From the outset, however, Nortel’s creditors weren’t entirely satisfied with a bid that wasn’t an all-cash offer. In previous auctions of Nortel business assets, involving its wireless and enterprise businesses, the former telecommunications colossus had accepted all-cash winning bids from Ericsson and Avaya, respectively.

The size of the Ciena bid, and the fact it contained a non-cash element, suggested that the competition for Nortel’s MEN assets wouldn’t be as intensive or extensive as were the auction battles for Nortel’s wireless and enterprise businesses.

In fact, Nortel had to pull out all the stops to get another bidder to contest the Ciena offer. On November 13, Nortel extended the deadline for bidding until November 17. The company seemed to be giving a second prospective bidder more time to cobble together an offer. Earlier, on November 3, two people familiar with the process said Nokia Siemens Networks (NSN) was considering a bid, according to Bloomberg.

Well, at long last, the beleaguered and conflicted NSN apparently has moved toward the auction ring. It needed assistance to do so, however, which tells you all you need to know about why the bid took so long to come together — and why Nortel had to extend the original deadline.

NSN apparently is making its bid in conjunction with private-equity firm One Equity Partners LLC, which manages $8 billion in investments for JPMorgan Chase & Co.

If you peruse One Equity’s investment portfolio, you’ll notice that it doesn’t exactly specialize in the telecommunications-equipment space. It has money, though, and that clearly was a draw for NSN, which is going through a dark night of the corporate soul as well as a difficult restructuring. At one point, one or both of its joint venture partners were said to be contemplating abandonment of the enterprise, with Siemens AG particularly uncertain about its commitment to the business.

Now, though, it appears NSN will make a bid. We know neither how high that bid will be nor how high Ciena will be willing to go to claim Nortel’s MEN assets. Many analysts who follow Ciena, as well as certain large investors in the company, would prefer not to see it escalate its offer much beyond the level set by the stalking-horse bid.

Something to keep in mind is that Nortel’s MEN business isn’t exactly firing on all cylinders. After some delay, Nortel reported its third-quarter financial results earlier this week; and, as one might expect from an insolvent company going through bankruptcy-related dissolution, Nortel is not doing well. Of the continuing operations that it fully owned, the MEN business saw the biggest year-over-year quarterly revenue decline. For the third quarter of fiscal year 2009, Nortel’s MEN business generated $295 million in revenue, down 26 percent from revenue of $398 million in the third quarter of 2008.

That’s not to say that somebody couldn’t acquire it, rehabilitate it, and get it back on track. It might be a fixer-upper property worth considering. It’s still a challenge, though, and neither Ciena nor NSN can afford to overpay extravagantly. If the bidding rises above $800 million, the ostensible winner of this auction eventually might be seen as the loser.

Regardless of the outcome, the auction will kick off tomorrow.

Motorola Division Up for Sale: WSJ

Sources have told the Wall Street Journal that Motorola is preparing to sell its home and networks mobility division for approximately $4.5 billion.

The article, quoting “people familiar with the matter,” says potential acquirers include private-equity firms and telecommunications-equipment vendors.

Allegedly among the private-equity firms considering the purchase are TPG and Silver Lake Partners, both of which are said to be attracted to the division’s continuing profitability. On the other side of the aisle, equipment vendors said to be candidates to purchase all or part of the division include South Korea’s Samsung Electronics Co., China’s Huawei Technologies Co., Sweden’s L.M. Ericsson and Pace PLC of the U.K.

Not surprisingly, neither the private-equity firms nor the gear vendors have anything significant to say about their rumored interest in Motorola’s assets.

J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. are said to be advising Motorola on the sale of its home and networks mobility division, which is now Motorola’s largest.

It includes core and edge network products, such as two-way digital video headend systems and bandwidth-management systems, along with related software; access-network products and technologies, including those supporting GPON (Gigabit Passive Optical Networking), CMTS (Cable Modem Termination Systems), BAN (Broadband Access Network) and FTTx (fiber to the home or enterprise); wireless-network infrastructure for 3G and 4G networks, including LTE and WiMAX; and customer-premise equipment, such as digital set-top boxes, DSL and cable modems, residential gateways, and WiMAX modems.

Considering that the division’s product portfolio is so varied, it’s conceivable that it Motorola could sell parts of it to at least two different buyers. For example – and this is only hypothetical – Samsung or Pace might purchase the customer-premise equipment and the access-network products and technologies, with Ericsson or Huawei buying the wireless-network infrastructure. Alternatively, Motorola might decide to keep the wireless infrastructure and sell the remainder of the division.

The mooted sale of the home and networks mobility division follows a nosedive in Motorola’s financial performance that effectively torpedoed the company’s plans to spin off its handset business, which hasn’t had a hit since the Razr climbed to the top of the sales charts several years ago. Of course, Motorola is hoping that its geekily marketed Droid smartphone reverses its declining handset fortunes.

Motorola says it maintains its commitment to a long-term plan that would split the company into two businesses: mobile devices and broadband mobility solutions.

Reviewing the Skype Deal

If the battle for Skype were a television series, it would have been equal parts soap opera and suspense thriller. It nearly segued into courtroom drama, but it wouldn’t have been a good one, likely way too one-sided for engrossing fare.

In the end, it was the specter of a courtroom rout that got the principals to the table to hammer out a settlement that leaves a few people happy, a few people content, and a few people disconsolate. There were winners, losers, and those who fall somewhere between those unambiguous extremes.

I think Om Malik has done an excellent job categorizing how the various players fared. His blunt assessment is keenly accurate, cutting through the cant and dishonest spin of those who would try to persuade us that we can trust neither our own lying eyes nor our critical faculties.

As far as the official breakdown, eBay finally gets to sell majority ownership of Skype to a consortium of investors, though the composition of those investors — and the overall percentage of the company they’ll take off eBay’s hands — has changed.

The key paragraph, excerpted from the press release announcing the settlement, is this one:

“As part of the settlement agreement, Joltid and Skype founders Niklas Zennström and Janus Friis will join the investor group, contributing Joltid software and making a significant capital investment in exchange for a 14 percent stake in Skype. As a result, Silver Lake and other investors including Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB), will together hold 56 percent of Skype and eBay will retain 30 percent. As previously announced, eBay will receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The deal, which values Skype at $2.75 billion and is not subject to a financing condition, is expected to close in the fourth quarter of 2009.”

In the original ill-fated arrangement, announced September 1, eBay sought to sell 65 percent of Skype to a consortium of investors that was led by Silver Lake. That consortium included Index Ventures but excluded Skype’s founders, Zennstrom and Friis, who — by the time this story runs its course — will have been both sellers and buyers of Skype in separate transactions with eBay.

Like the doomed proposal that preceded it, today’s announced agreement values Skype at about $2.75 billion.

Index Ventures and Mike Volpi, a partner in that firm, are not part of the deal. Index would like us to believe that this arrangement occurred entirely of its own volition, but the evidence suggests otherwise. Here is what Danny Rimer, a partner at Index Ventures, had to say about the Skype settlement:

“We are pleased that Skype will now be able to put litigation behind it, and we wish Josh Silverman, his team and the Skype investors well in continuing to grow a great business. Although Skype has the potential to be a great investment, the deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction.”

Om Malik contends rightly that this is . . . er, poppycock.

I don’t know whether Index could have said anything to take the sting out of the loss it sustained, on multiple fronts, in this whole Skype imbroglio. Nonetheless, the quote Rimer provides is embarrassing and ungracious. There are times when it’s best to say nothing, and this qualified as one of them.

It’s all over but the shouting now. With 23 directors, Skype might want to soundproof the boardroom.

Skype Settlement Said to be Imminent

Although a settlement seems to be in place — with Skype founders Niklas Zennstrom and Janus Friis receiving a 10-percent equity stake in Skype, plus two board seats, and with Index Ventures and Mike Volpi getting banished from the deal — a formal announcement including all the pertinent details has yet to be delivered by the legal gods to us mere mortals.

It shouldn’t be long, though.

Network World Reprises Volpi’s Medley of Email Hits

For those who cannot get enough of the intrigue, scheming, and shenanigans surrounding the boardroom-to-courtroom-to-boardoom battle for the ownership of Skype, Brad Reese at Network World reproduces a medley of Michael Volpi’s greatest email hits.

Thrill to Volpi’s message about “getting the father of SIP to jump ship” from Cisco. Enjoy his follow-up message to Egon Durban, managing director at private-equity firm Silver Lake, regarding the need to fill out a SIP engineering team with five or six solid VoIP software engineers. Marvel at Volpi’s disparagement of former colleagues and Skype-deal confederates.

Moreover, consider that he was writing all these email hits while still employed as the CEO of a company (Joost) that was founded and run by the same duo, Niklas Zennstrom and Janus Friis, who founded Skype before selling it to eBay and who entertained hopes of owning it again. Also ponder that much of the same underlying p2p software used at Joost, at least originally, also served as the architectural foundation for Skype.

Finally, consider that Volpi was said to have led and been involved in an architectural transition at Joost that saw the video-sharing site move from the p2p foundations on which it was based — using the same Joltid technology that was licensed by Skype — to a client-server architecture that employed Flash-based web clients at the end points.

At minimum, there would appear to be superficial similarities between the architectural overhaul that had occurred at Joost and what Volpi proposed for Skype.

Despite Conflicted Parents, NSN Reportedly Considering Nortel MEN Bid

Joint ventures, by their very nature, are complicated beasts. Even when the parent companies get along and are relatively aligned in their strategic directions, differences arise.

Sometimes joint ventures experience mild personality disorders resulting from the conflicting or diverging needs of the parents. Occasionally, though, when the discrepancies between parent companies are pronounced, the joint venture can exhibit all the behaviors and tendencies of a bipolar psychotic.

I think that’s what we’re witnessing at Nokia Siemens Networks (NSN), the loss-making joint venture between Finland’s Nokia and Germany’s Siemens. The latter partner has lapsed into depressed passivity, unsure whether it has the heart, the stomach, or the wallet for protracted losses in the telecommunications-gear market. Nokia, however, after taking its lumps and its goodwill writedowns, is enthusiastically gearing up for another run, with particularly keen emphasis on the wireless operators of North America as prospective customers.

So, if you’re wondering why Siemens and Nokia supposedly can be seriously weighing their ongoing commitment to NSN a few weeks ago and then reportedly pondering an auction bid for insolvent Nortel Networks’ Metro Ethernet Networks (MEN) business as of yesterday, you have to understand both the nature of joint ventures and the characters of these two parent companies.

As Nokia comes under increasing attack from low-end handset vendors in the developing world and high-end smartphones from the likes of Apple, Palm, and licensees of Google’s Android mobile operating system, it is desperate to strengthen its increasingly tenuous grip on carrier relationships, especially in North America, where its traditional weakness has become particularly egregious. For Nokia, then, NSN is a strategic bulwark, one it’s not yet ready to abandon.

For Siemens, well NSN is . . . what, exactly?

At one time, I’m sure NSN made sense for the German engineering conglomerate, and if Siemens Enterprise Communications (another joint venture, this one with Gores Group) had been successful in wresting Nortel’s enterprise business from Avaya at an earlier auction, there might have been some reciprocal synergies worth exploring. Now, though, it’s easy to understand Siemens’ gloomy ambivalence toward the whole project. Just how does NSN serve Siemens’ overall strategic objectives?

It’s an open question.

Anyway, getting back to NSN’s prospective interest in Nortel’s MEN business, I suppose a bid is entirely possible, especially if Nokia is driving the bus.

As I type this post, CIena’s $521-million cash-and-stock bid is the pacesetter in the forthcoming MEN auction. Actually, Ciena is only entrant to declare formal interest, though speculation has built in recent days regarding potential bids from Ericsson (possible), Cisco (is John Chambers suffering a late mid-life crisis?), and Infinera (possible).

Keep in mind, however, that, as of now, NSN has not thrown its hat into the auction ring. It could be that the reports we’re reading are just trial balloons, meant to test reactions and flush other bidders from hiding.

Either way, the clock is running on prospective bidders. As reported by Light Reading, the deadline to submit bids for the Nortel MEN auction is Monday, Nov. 9, with the auction itself scheduled for Friday, Nov. 13.

Let’s hope the bidders, and Nortel’s creditors, aren’t superstitious.