UPDATE: Nortel Says RIM Didn't Express Interest Until July 15
(Adds analyst commentary, comments from an institutional investor and
additional context in paragraphs 3-7. Adds comments from Nortel in paragraph
16.)
By Stuart Weinberg
OF DOW JONES NEWSWIRES
TORONTO -(Dow Jones)- Shares of Research In Motion Ltd. (RIMM) are down
slightly Tuesday as investors try to make sense of RIM's interest in Nortel
Networks Corp.'s (NRTLQ) wireless-infrastructure business.
Analysts said RIM is likely interested in adding Nortel's intellectual
property, its Ottawa facility and engineers. The business would also bring RIM
attractive deferred tax assets, Scotia Capital's Gus Papageorgiou said in a
note. At the end of March, Nortel's overall deferred tax assets were about $6.2
billion, most of them in Canada, he said.
Papageorgiou said he believes a large portion of Nortel's 2,500 wireless-
division employees are radio engineers, and they would be attractive to RIM.
UBS Investment's Philip Huang wondered why RIM would want to enter the
wireless infrastructure sector, which is outside its area of expertise and a
lower-margin business than the smartphone business.
One institutional investor who holds a large RIM stake said he believes RIM is
interested primarily in Nortel's LTE (Long-Term Evolution) patent portfolio. He
said he believes RIM may sell the network-equipment business if its bid is
successful and use the acquired patents to deter infringement lawsuits by rival
handset vendors.
RIM is already embroiled in a patent dispute with one-time industry titan
Motorola Inc. (MOT), and its emergence in the smartphone industry could make it
a target of rivals like Sony Ericsson, or Nokia Corp. (NOK), the investor said.
Last week, RIM agreed to pay closely held Visto Corp. $267.5 million to settle
its long-running patent dispute with the wireless-email-software vendor. In the
past 18 months, the company has spent about $1.1 billion on the acquisition of
intangible assets, primarily patents.
As reported, RIM said late Monday it's being prevented by Nortel from bidding
on Nortel's wireless business. Waterloo, Ont.-based RIM, maker of the BlackBerry
smartphone, said it's prepared to pay roughly $1.1 billion for Nortel's CDMA and
LTE access businesses and certain other Nortel assets. It said Nortel, which is
in bankruptcy protection, scuttled RIM's attempt to bid by inserting conditions
that it knew were unacceptable to RIM.
In particular, Nortel indicated that, to be considered a qualified bidder, RIM
had to promise not to bid on other Nortel assets for one year. In seeking to
impose this condition, Nortel knew RIM planned to "purchase other Nortel assets
as part of a solution to retain key portions of Nortel's business under Canadian
ownership," RIM said Monday. RIM asked the Canadian government to review the
situation.
In an emailed statement, Canada's Minister of Industry, Tony Clement, said
he's aware of the discussions between Nortel and RIM and is following the
situation closely. He said any proposed sale by Nortel must be approved by the
judge in charge of bankruptcy proceedings, and that the government of Canada
doesn't have a say over how the judge rules. "It would be inappropriate to
speculate on any future actions that Nortel may choose to undertake under the
Companies' Creditors Arrangements Act (CCAA) process," the email said.
Nortel agreed last month to sell its wireless business to Nokia Siemens
Networks for $650 million. Alternative bids are due Tuesday and are part of the
bankruptcy court's process to see if the assets can fetch a higher price before
the court approves the sale.
Officials from Nokia Siemens weren't immediately available for comment. Nokia
Siemens is a joint venture between Nokia and Siemens AG (SI).
In an emailed statement, Nortel said it's disappointed that RIM issued a press
release relating to the scheduled auction for Nortel's CDMA and LTE assets. The
email said the court established bidding procedures for the auction on June 30
and that RIM didn't object to the approval of these procedures. The auction is
scheduled for Friday.
Nortel has engaged with a number of potential bidders, including RIM, the
email said. Other parties moved expeditiously to comply with the court-approved
procedures to become qualified bidders, but RIM only submitted a letter on July
15 asking to be a qualified bidder, the email said. Since then, "Nortel has
diligently attempted to work with RIM on acceptable confidentiality terms
relating to Nortel's intellectual-property assets, but RIM refused to comply
with the court-approved procedures," the email said.
The email also said Nortel remains willing to provide RIM with the opportunity
to participate in the auction. However, it added that, even without RIM's
participation, the company believes that an active auction will result in
maximizing the value of Nortel's assets.
The Nokia Siemens transaction includes the sale of substantially all of the
CDMA business and LTE access research and development resources. The deal
includes some intellectual property rights but excludes a small number of 4G
wireless patents, Nortel said. Nortel plans to sell those patents separately,
the company said.
A RIM spokeswoman said the company had no comment.
On Nasdaq Tuesday, RIM is down $1.37 or 1.8% to $73.60 on 3.8 million shares.
Company Web Site: http://www.rim.com
-Stuart Weinberg, Dow Jones Newswires; 416-306-2026;
stuart.weinberg@dowjones.com
(Ben Dummett in Toronto contributed to this article.)
(END) Dow Jones Newswires
07-21-091428ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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