Nortel Enterprise Unit Set for Avaya-Driven Auction

Two bankruptcy courts on Tuesday gave Nortel Networks Corp. (NT) permission to sell its enterprise business at a Sept. 11 auction.

A judge in the United States and another in Canada approved the auction’s rules. Avaya Inc. will make the opening bid of $475 million. Siemens is expected to vie for the unit as well, although it has not said how much it’s willing to pay. All bids must be submitted by noon on Sept. 4.

Nortel’s enterprise division makes up more than one-fifth of the company’s overall revenue. But sales fell 41 percent in the first quarter of 2009. Avaya hopes to turn those numbers around, although some observers doubt its ability to do so, given the struggles it’s encountered even after going private.

Nonetheless, Avaya remains optimistic. And it’s covered its potential losses by requiring a break-up fee of $14.25 million if it doesn’t win next month’s auction. The results must get the thumbs-up from the courts; a hearing on the Sept. 11 event is set for Sept. 15, at which time the winner will be solidified.

Last month, Ericsson won the auction for Nortel’s wireless business.

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