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Nortel Networks

Companies Reach Definitive Agreement for the Sale of Nortel's UMTS Access Business to Alcatel-Lucent

Toronto, Canada (ots/PRNewswire)

Nortel(x) (NYSE: NT , TSX: NT)
today announced that it has reached a  definitive agreement for the
sale of certain assets and the transfer of  certain liabilities
related to the company's UMTS access business to  Alcatel-Lucent. It
follows the signing of the non-binding Memorandum of  Understanding
between the two companies announced September 1, 2006. The
transaction is a US$320 million cash transaction, less significant
deductions and transaction related costs. The parties have agreed to
target  a closing at year end, and in any event, a closing within 90
days of  today's announcement. Approximately 1,700 of Nortel's UMTS
access business  employees will transfer to Alcatel-Lucent.
"The completion of this transaction will allow Nortel to increase
resources dedicated to our strategic business priorities. It also
positions  Alcatel-Lucent to be successful in the UMTS access market
with an infusion  of great technology and great people," said Mike
Zafirovski, president and  chief executive officer, Nortel. "This
transaction is a win-win for both  companies, but more importantly,
for our customers. We will continue to  work with Alcatel-Lucent to
ensure the transition is seamless to our  customers."
"Nortel is committed to developing the wireless technologies that
will  deliver 4G Mobile Broadband and this provides one more step in
reaching  that objective," said Richard Lowe, president, Mobility and
Converged Core  Networks, Nortel. "Nortel is focused on providing the
foundation for the  coming mobile video and multimedia revolution
that mobile network operators  will soon face. At the same time, we
will continue delivering superior  value to our GSM and CDMA
customers, as well as our customers that have  deployed our UMTS core
networks".
Completion of the transaction is subject to, among other things,
the  conclusion of consultations with works councils and other
employee  representatives, finalization of the terms of certain
ancillary agreements  including a transitional services agreement
whereby Nortel will provide to  Alcatel-Lucent setup, infrastructure
and application services for a defined  period of time as well as
customary closing conditions including regulatory  approvals.
About Nortel
Nortel is a recognized leader in delivering communications
capabilities that enhance the human experience, ignite and power
global  commerce, and secure and protect the world's most critical
information. Our  next-generation technologies, for both service
providers and enterprises,  span access and core networks, support
multimedia and business-critical  applications, and help eliminate
today's barriers to efficiency, speed and  performance by simplifying
networks and connecting people with information.  Nortel does
business in more than 150 countries. For more information,  visit
Nortel on the Web at www.nortel.com. For the latest Nortel news,
visit www.nortel.com/news.
Certain statements in this press release may contain words such as
"could", "expects", "may", "anticipates", "believes", "intends",
"estimates ", "targets", "envisions", "seeks" and other similar
language and are  considered forward-looking statements or
information under applicable  securities legislation. These
statements are based on Nortel's current  expectations, estimates,
forecasts and projections about the operating  environment, economies
and markets in which Nortel operates. These  statements are subject
to important assumptions, risks and uncertainties,  which are
difficult to predict and the actual outcome may be materially
different. Further, actual results or events could differ materially
from  those contemplated in forward-looking statements as a result of
the  following (i) risks and uncertainties relating to Nortel's
restatements and  related matters including: Nortel's most recent
restatement and two  previous restatements of its financial
statements and related events; the  negative impact on Nortel and NNL
of their most recent restatement and  delay in filing their financial
statements and related periodic reports;  legal judgments, fines,
penalties or settlements, or any substantial  regulatory fines or
other penalties or sanctions, related to the ongoing  regulatory and
criminal investigations of Nortel in the U.S. and Canada;  any
significant pending civil litigation actions not encompassed by
Nortel's proposed class action settlement; any substantial cash
payment and /or significant dilution of Nortel's existing equity
positions resulting  from the approval of its proposed class action
settlement; any unsuccessful  remediation of Nortel's material
weaknesses in internal control over  financial reporting resulting in
an inability to report Nortel's results of  operations and financial
condition accurately and in a timely manner; the  time required to
implement Nortel's remedial measures; Nortel's inability  to access,
in its current form, its shelf registration filed with the  United
States Securities and Exchange Commission (SEC), and Nortel's below
investment grade credit rating and any further adverse effect on its
credit  rating due to Nortel's restatements of its financial
statements; any  adverse affect on Nortel's business and market price
of its publicly traded  securities arising from continuing negative
publicity related to Nortel's  restatements; Nortel's potential
inability to attract or retain the  personnel necessary to achieve
its business objectives; any breach by  Nortel of the continued
listing requirements of the NYSE or TSX causing the  NYSE and/or the
TSX to commence suspension or delisting procedures; (ii)  risks and
uncertainties relating to Nortel's business including: yearly and
quarterly fluctuations of Nortel's operating results; reduced demand
and  pricing pressures for its products due to global economic
conditions,  significant competition, competitive pricing practice,
cautious capital  spending by customers, increased industry
consolidation, rapidly changing  technologies, evolving industry
standards, frequent new product  introductions and short product life
cycles, and other trends and industry  characteristics affecting the
telecommunications industry; the sufficiency  of recently announced
restructuring actions, including the potential for  higher actual
costs to be incurred in connection with these restructuring  actions
compared to the estimated costs of such actions and the ability to
achieve the targeted cost savings and reductions of Nortel's unfunded
pension liability deficit; any material and adverse affects on
Nortel's  performance if its expectations regarding market demand for
particular  products prove to be wrong or because of certain barriers
in its efforts to  expand internationally; any reduction in Nortel's
operating results and any  related volatility in the market price of
its publicly traded securities  arising from any decline in its gross
margin, or fluctuations in foreign  currency exchange rates; any
negative developments associated with Nortel's  supply contract and
contract manufacturing agreements including as a result  of using a
sole supplier for key optical networking solutions components,  and
any defects or errors in Nortel's current or planned products; any
negative impact to Nortel of its failure to achieve its business
transformation objectives, including completion of the sale of its
UMTS  access business to Alcatel-Lucent; additional valuation
allowances for all  or a portion of its deferred tax assets; Nortel's
failure to protect its  intellectual property rights, or any adverse
judgments or settlements  arising out of disputes regarding
intellectual property; changes in  regulation of the Internet and/or
other aspects of the industry; Nortel's  failure to successfully
operate or integrate its strategic acquisitions, or  failure to
consummate or succeed with its strategic alliances; any negative
effect of Nortel's failure to evolve adequately its financial and
managerial control and reporting systems and processes, manage and
grow its  business, or create an effective risk management strategy;
and (iii) risks  and uncertainties relating to Nortel's liquidity,
financing arrangements  and capital including: the impact of Nortel's
most recent restatement and  two previous restatements of its
financial statements; any inability of  Nortel to manage cash flow
fluctuations to fund working capital  requirements or achieve its
business objectives in a timely manner or  obtain additional sources
of funding; high levels of debt, limitations on  Nortel capitalizing
on business opportunities because of support facility  covenants, or
on obtaining additional secured debt pursuant to the  provisions of
indentures governing certain of Nortel's public debt issues  and the
provisions of its support facility; any increase of restricted cash
requirements for Nortel if it is unable to secure alternative support
for  obligations arising from certain normal course business
activities, or any  inability of Nortel's subsidiaries to provide it
with sufficient funding;  any negative effect to Nortel of the need
to make larger defined benefit  plans contributions in the future or
exposure to customer credit risks or  inability of customers to
fulfill payment obligations under customer  financing arrangements;
any negative impact on Nortel's ability to make  future acquisitions,
raise capital, issue debt and retain employees arising  from stock
price volatility and further declines in the market price of
Nortel's publicly traded securities, or the share consolidation
resulting  in a lower total market capitalization or adverse effect
on the liquidity  of Nortel's common shares. For additional
information with respect to  certain of these and other factors, see
Nortel's Annual Report on Form10-K/ A, Quarterly Reports on Form 10-Q
and other securities filings with the SEC . Unless otherwise required
by applicable securities laws, Nortel disclaims  any intention or
obligation to update or revise any forward-looking  statements,
whether as a result of new information, future events or  otherwise.
(x) Nortel, the Nortel logo and the Globemark are trademarks of
Nortel  Networks.

Contact:

For further information: Pat Cooper, +1-(425)-450-7523,
pat.cooper@nortel.com; Jay Barta, +1-(972)-685-2381,
jbarta@nortel.com; Isabelle Tadmoury, +33-169551291,
tadmoury@nortel.com/

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