Nortel & Huawei scrap JV plans

Stuart Corner
Sunday, 11 June 2006 09:04

IT Industry - Deals

Nortel has terminated its planned joint venture with Huawei, announced only four months ago.
In a statement filed with the US SEC, Nortel said simply that the two companies had "decided not to proceed". However the SEC filing noted that "The parties are continuing discussions to define the nature that any ongoing alliance or relationship may take. An alliance or relationship, if any, would still be subject to negotiation, execution of definitive agreements and customary regulatory approvals."

However, George Riedel, Nortel's chief strategy officer, told Light Reading that the companies were still trying to find a way to work together without a formal agreement.

Nortel issued a press release on 1 February 2006 announcing the planned JV but its SEC filing said that the MoU had been signed on 9 November 2005. As late as 10 March this year Nortel was talking up the venture, when it issued a press release announcing a delay in its 2005 annual report filing. It said then that: "Nortel and Huawei ...have entered into a [MoU] with the intent to establish a joint venture focused on product enhancements for Huawei's current broadband access portfolio and the development of a new ultra broadband product portfolio."

That statement also said that "The two companies have also entered into a supply agreement that allows Nortel to immediately begin engaging customers with Huawei's current industry-leading broadband access portfolio supporting Nortel's focus on seizing opportunities that will generate new revenue and expand operating margin." The SEC filing did not give any indication of the status of this agreement.

The new company was to be majority-owned by Nortel and headquartered in Ottawa. It was to "combine Huawei's market leading broadband access solutions with Nortel's voice and broadband networking technologies to create a new product portfolio designed to be a leader in the industry in value and performance". Its products were to be sold exclusively by Nortel and Huawei.

Nortel president and CEO, Mike Zafirovski, described the move as "a bold opportunity to combine the strengths of Huawei and Nortel into a company that can aggressively target and win share in the rapidly expanding ultra broadband market".