Motorola, Nortel in Talks to Combine Units: Paper

By Yinka Adegoke, Reuters  |  Posted 2008-02-11

NEW YORK (Reuters) - Motorola Inc and Nortel Networks Corp are in talks to combine their wireless infrastructure units, The Wall Street Journal reported, quoting people familiar with the situation.

The talks could create a joint venture with sales of around $10 billion, combining businesses that make network equipment for wireless phone carriers, the newspaper said.

Both companies declined comment.

Motorola said in January it was exploring strategic options for the future of its handset division, which could include selling the unit. The Journal said Motorola's talks with Nortel were separate to any plans for its handset division.

Motorola, the world's third-largest mobile phone maker, which has been losing market share to market leader Nokia Corp (NOK1V.HE: Quote, Profile, Research) and Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research), is under pressure from activist investor Carl Icahn to split up and increase value for shareholders. Icahn owns a 5 percent stake.

Any deal between Motorola and Nortel would follow a wave of mergers in the global telecoms sector, as equipment makers combine in a bid to gain economies of scale and more pricing power against telephone carriers that are also merging.

The biggest deal in the telecoms equipment industry was Alcatel-Lucent, whose market value has shrunk by more than $20 billion since a merger in 2006. The French-American group said last week it wrote down 2.94 billion euros ($4.3 billion) against the assets it bought in 2006 and gave disappointing forecasts for 2008.

Motorola shares were up 16 cents, or 1.4 percent to $11.42 and Nortel's U.S. shares were up 1 percent, or 10 cents, at $11.17 in early trading on the New York Stock Exchange.

(Reporting by Yinka Adegoke in New York, Sinead Carew in Barcelona and Jonathan Spicer in Toronto, editing by Mark Porter)

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