‘Crown jewel’ up for grabs

Consumers have almost non-stop appetites for watching video on the Internet, a habit that bidders for financially troubled Nortel Networks will consider when they look at its technology for bandwidth hunger.

MONTREAL — Consumers have almost non-stop appetites for watching video on the Internet, a habit that bidders for financially troubled Nortel Networks will consider when they look at its technology for bandwidth hunger.

A key unit of Nortel that’s based in Montreal has this technology and is still up for grabs, possibly fetching as much as $1.5 billion, analysts said.

Technology analyst Duncan Stewart said people are watching “tens or hundreds of times” as much video online and it’s “saturating” networks.

Nortel’s Metro Ethernet Networks has patented technology that will allow the speed and capacity of fibre optic networks to upgraded, he said.

The technology was developed about a decade ago, making Nortel a leader in the field at the time, but competitors also haves similar technology.

Analyst Mark Tauschek said the Metro Ethernet Networks unit may be less valuable now than it was a year or six months ago because it hasn’t made a lot of recent sales of its technology, but still called it one of Nortel’s “crown jewels.”

“It probably will be more valuable than the wireless unit,” said Tauschek, senior analyst at Info-Tech Research Group in London, Ont.

The Montreal-based unit has said its technology will allow fibre optic cables can quadruple existing speeds.

Stewart said it’s like putting a new engine in a car that will make it go four times faster without changing the tires or the road, meaning existing networks don’t have to be ripped out.

Companies that make equipment for the backbone of the Internet like Cisco, France’s Alcatel-Lucent, China’s Huawei or private equity groups could make a bid for the unit, analysts said.

Unlike the Nortel’s wireless unit which has BlackBerry maker Research In Motion (TSX:X) interested in buying it, there is no Canadian suitor for the Montreal-based division, Stewart said.

Swedish telecom firm Ericsson won the auction for the wireless unit with a US$1.13 billion bid, but it appears the Canadian government may review the sale. RIM has made an informal offer of US$1.1 billion for Nortel’s wireless division.

Telecom analyst Eamon Hoey the unit has seen better days, but it has continued to develop its technology.

“Nortel probably had the best technology in the world circa 2000 and has continued to pour R&D money into it,” said Hoey, senior partner at Toronto-based Hoey Associates.

The need to expand bandwidth is continually increasing, he said.

“We’re getting more and more devices at the user levels that area really hogs in terms of bandwidth requirement.”

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