Nortel asset firesale seen as it fights to survive

By Wojtek Dabrowski - Analysis

TORONTO (Reuters) - Nortel Networks Corp will likely give up its crown as North America's biggest maker of telephone equipment as it sheds assets at firesale prices in a desperate bid to survive.

The Canadian company said on Wednesday that the "global financial crisis and recession" have sabotaged the turnaround effort it had started in 2005, pushing it to file for court shelter from its creditors.

Now, as it tries to stretch its $2.4 billion in cash to carry it through the court process and a persistently tough operating climate, Nortel's widely expected asset sales will have to take place at an economically inopportune time, to say the least.

"They may be forced to sell assets to reorganize, but they're not going to get much for them," said Ed Snyder, principal analyst at Charter Equity Research. "It's a tough position to be in."

He added potential buyers could be "picking over the pieces rather than buying the whole".

What's most likely is that Nortel will be reshaped and scaled down as it restructures under court protection.

"I think the company is not going to exist in its current form," said RBC Capital Markets analyst Mark Sue. "It will be a much smaller firm with assets picked up by low bidders."

With credit markets still in near-freeze, interest from private-equity groups is highly unlikely. That leaves strategic buyers -- competitors, in other words -- to kick the tires on Nortel's divisions.