The first headline in the news that Nortel issued just a few hours ago centered around the 'stalking horse' agreement that Nortel has entered into with Nokia Siemens Networks (NSN) to purchase Nortel's CDMA and LTE assets.

But it's the secondary headline that many people -- employees, customers, and others -- will be just as interested in: "Company Advancing in Its Discussions With External Parties To Sell Other Businesses"

In an email to all Nortel employees, Nortel CEO Mike Zafirovski dedicates much of his thoughts to outlining the path Nortel has chosen to sell its other business units, and what this means for employees and customers.

And in those thoughts, two statements in Mike's message provide a definitive statement on the path Nortel is on:

"...it is clear that there will be fewer players in our industry in the future. It is clear now that Nortel will not be one of them in our current form."

 

"Nortel will not emerge from the process that began with our filings for creditor protection."

So while the big news of the moment is the $650 million bid that NSN has offered for Nortel's CDMA and LTE businesses, what will hold our attention for some time to come is the clear understanding now that this is likely the first of several major asset sale announcements that lead to the end of Nortel as we know it.

Below is the complete "Zmail" from Mike Z to Nortel employees:

=================

Team Nortel:

It has been a long journey since our January 14 announcement. Nortel has been battling against a tough marketplace and the effects of our filings for creditor protection. I want to thank you for your efforts to stabilize our business, preserve our customer relationships and face the task at hand with both a sense of reality and optimism. You have driven hard and with a sense of urgency to close business and move this company forward under the harshest of circumstances. Your dedication and hard work have been inspiring.

Today, I want to share some news with you on Nortel’s and your future, to provide some clarity around our decision-making process and what lays ahead. As you know, evaluating our businesses to determine the ultimate path forward has been our most critical priority. On May 11, we said we were working to maximize the value of the company, while preserving our innovation platforms and employment to the greatest extent possible. We also said that we had been in discussions with external parties around a number of our businesses. I am pleased to announce that these discussions have progressed and that today we:

• entered into a "stalking horse" sale agreement for our CDMA business and LTE Access assets with Nokia Siemens Networks for US$650 million.

• are advancing in discussions with external parties to sell our other businesses.

I know you are eager to hear what this means for Nortel, and for you. You will be hearing first from your business leaders in greater detail at live GISs starting on Monday, then I will provide additional comments in a company-wide video before the week is over. But first, let me briefly provide some context around how we reached these decisions.

In early 2006, we set out on an ambitious path to transform this company – to significantly improve our operations and cost structure, and aggressively shift our economic center and investment bets from legacy to the high-growth segments of the market. You have made tremendous progress on many fronts – capturing our customers’ appetite for innovation with cutting-edge technologies like 40Gig/100Gig; LTE, CVAS and Unified Communications – transforming our processes and improving our product quality and customer service levels – while fixing our significant accounting and legal issues. Our strategic intent was to drive industry consolidation through organic growth and acquisitions. While we made considerable progress, we could not achieve the financial leverage required to lead this effort, especially with the economic downturn and credit crisis.

Let me be clear. Together, you have created real value for this company, and today’s news and the ongoing and tangible interest in our businesses and intellectual property by other parties are solid proof points. Our priority going forward will be to leverage that interest to maximize the value you have worked so hard to create. Around that, my focus continues to be to do everything we can to ensure our customers continue to benefit from Nortel innovation and that as many employees as possible have the best chance to move with our businesses as they potentially move into other companies.

Best Path Forward for Wireless

As we evaluated our businesses it became clear that a sale is the best path forward for our Wireless business. This decision allows this business to preserve the significant value inherent in its know-how and leading-edge technologies and solutions, particularly if it is consolidated in companies that can bring greater scale to the marketplace.

You have built this business into a strong player in the market and a valued asset in the industry. Nortel is the second largest supplier of CDMA infrastructure in the world – we do business with three of the five top CDMA operators globally, including Verizon Wireless, which operates the largest wireless voice and data network in the United States. With strong customer relationships globally, you have driven differentiation and competitive advantage through deep innovation in the wireless space.

At the same time, the leading innovation and capabilities of our 4G innovations have been driving our world toward true mobile broadband. Our LTE capabilities have been well-received by key global carriers and are very complementary to the LTE efforts of Nokia Siemens. The inclusion of certain of our LTE Access assets means that Nortel-grown innovation will remain at the forefront of the next wave of wireless networks. We should all be proud of the many Nortel employees who have contributed so much to move 4G forward—their legacy is an important one.

"Stalking Horse" Process

It is also extremely important to understand the processes around the wireless sale agreements. In the U.S., this sale requires a court-approved bidding process, known as a “stalking horse” or 363 Sale under Chapter 11 of the U.S. Bankruptcy Code. Consummation of the "stalking horse" transaction is subject to higher or otherwise better offers.

This "stalking horse" process is controlled and prescribed through the courts and we must ensure it is a fair and open one. You will see very limited discussion around what a combined business would look like as we cannot favor the "stalking horse" purchaser over another potential bidder. There will be no business or portfolio integration taking place until the process has been completed and definitive purchase agreements are in place. During this time, employees must remember that they should continue their ongoing duty to act in the best interest of Nortel and not any potential purchaser.

In addition to the auction process and Ontario Superior Court and U.S. Bankruptcy Court approvals, the agreements are subject to other customary approvals, including government approvals such as in Canada and the U.S.

Advanced discussions to sell our other businesses

Since the beginning of the filing process, our focus has been on preserving the value of our businesses – our technology, customer relationships and the know-how of our people – in the face of a contracting and consolidating global market. We had every intention of leading that consolidation, as it is clear that there will be fewer players in our industry in the future. It is clear now that Nortel will not be one of them in our current form. But, to maximize the value of our businesses, we will leverage the opportunity that consolidation presents.

There are important implications that flow from this decision that we must be very transparent about. If we are successful in selling our other businesses, Nortel will not emerge from the process that began with our filings for creditor protection. Nortel will apply to delist its common shares and the NNL preferred shares from trading on the Toronto Stock Exchange. We do not expect that the Company’s common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings, and we expect that those proceedings will ultimately result in the cancellation of these equity interests. If we are not successful in finding buyers, then we will evaluate other alternatives for those businesses at that time.

We have continually sought a solution that would allow us to emerge from the process and continue writing the history of this storied company. We have looked at every possible alternative, but we believe that this is the best path to provide clarity to our customers and employees, preserve the innovation that is the Nortel heritage and maximize value for all creditors, including Nortel employees and pensioners. For some this will mean a potential path forward in a new home. For others, it will mean an end to the uncertainty and a need to move on to new opportunities. I am confident that this is the truly the best outcome.

The Road Ahead

We still have much work ahead of us. Continuing to stabilize our customer base, even as our businesses possibly become part of other companies, is key to achieving the best return on these assets. Working to preserve that value is important to all of us and other stakeholders.

One of our top priorities will be doing everything we can to ensure successful integration with the acquirers of our businesses. Capturing the full value of Nortel’s strengths will be their objective, and we must do everything in our power to see that happens. I am deeply committed to achieving that goal in the coming months.

I want to assure you, as we move forward, we will make every effort to be transparent around the sale of any of our businesses and the timeframe for filing our final plan with the courts. There will be many questions you will have and we will try and answer them to the best of our ability.

I want to again thank you for your hard work and dedication over the last few months – and for so many of you – years at Nortel. There’s no question, the know-how and innovation that began at Nortel will continue to influence and lead our industry as our businesses and many of our people find new homes under new banners. The new players created will have every opportunity to succeed precisely because they are standing on your shoulders.

Thank you for all you are doing for Nortel,

Mike