Nortel Selling Enterprise Unit to Rival Avaya, For Now

Avaya Inc. plans to buy most of rival Nortel Networks Corp.’s (NT) enterprise unit for $475 million.

Just as it’s done with the wireless division, bankrupt Nortel seems to be using the announcement to attract other, higher bids.

The enterprise division sells phone systems and other communications equipment to businesses and large organizations worldwide. Avaya especially wants the Europe, Middle East and Africa portion of Nortel’s Enterprise Solutions business, and, if the deal goes through, also will get the government subsidiary, which serves United States federal agencies.

Nortel will file details of the agreement with the U.S. Bankruptcy Court in Delaware, along with a motion to set bidding procedures for an auction. That will give other companies a chance to vie for the enterprise assets.

Nortel filed for bankruptcy on Jan. 14. It had intended to emerge from insolvency in one piece, albeit a smaller one. But with creditor demands and low-ball purchase offers, that possibility looks less likely every day. If Nortel does indeed sell its enterprise and wireless businesses, it still will have the Metro Ethernet Networks unit – arguably its most valuable – on its hands.