Nortel Networks Ltd. put the brakes on its joint venture with Huawei Technologies Co. Ltd. to develop high-speed broadband access gear. The Canadian vendor quietly filed a 10-Q statement with the Securities and Exchange Commission detailing the break-up.
The joint venture was announced in February and promised to combine Nortel’s established relationship with operators around the world with Huawei’s low-cost gear, similar to Nortel’s ongoing arrangement with South Korea’s LG Electronics Co. Ltd. Dubbed LG Nortel Co., this joint venture brought in more than $50 million for Nortel during the first quarter.
But deals with Chinese vendors have slipped through Nortel’s hands, going to rivals like Nokia Corp., which snagged an agreement with China Putian last October to develop third-generation wireless infrastructure based on both TD-SCDMA and W-CDMA technology. Nortel’s joint venture with Huawei was to be based in Ottawa, with Nortel owing a majority of the company. The JV was to have resold Huawei’s products.
Nortel said in an e-mail that, “On Nov. 9, 2005, we and Huawei Technologies Co. Ltd. entered into a non-binding Memorandum of Understanding to establish a joint venture for developing ultra broadband access solutions. We and Huawei have now decided not to proceed with a joint venture. 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.”
The now-defunct joint venture was seen as Nortel’s re-entrance into the broadband access market, which Nortel left in 2001. Broadband access equipment converges the delivery of voice, video, data and wireless services onto a common IP platform that supports copper, fiber and fixed wireless networks.
UBS Investment Research had warned that the deal was not without risk, having stated: “We view (Nortel’s) strategy as practical; both from an investment and time-to-market standpoint as re-entering the access market with its own products only would be difficult after exiting in 2001. Major risk is the ability to manage the joint venture and partner effectively with Huawei. We note that in the past, Huawei’s joint ventures with 3Com and Siemens have not proven as successful as initially anticipated.”
Huawei could not be reached for comment.
