I'd like to get a discussion started regarding NT's plans to spin off its components business:
yahoo.cnet.com
In one place the article says:
"Roth said he recognizes the need to diversify and plans to have the business sell to companies, such as Juniper Networks, that need devices to connect their products to optical networks. He doesn't expect to succeed in selling to Nortel's competitors in making systems, as Lucent does now with its components unit.
"You have to have some accounts with a history actually based on market prices, not internal transfer costs," Roth said in the interview earlier this week in Santa Clara, Calif. "But I'm not putting in capital equipment to service my competitors; my goal is to build a strong Nortel by having a strong components unit." . . .
"We're not interested in separating the unit," Roth said. "We always want control. That's why we didn't do the Corning deal. That's why we wouldn't sell it."
I understand the politics of not selling products to competitors, but I don't understand the thinking that says you can expect a public company to be that selective. It seems to me --- looking at it from an investor's standpoint --- that Roth wants to have his cake and eat it too. As a shareholder, I'd want the company to sell to everyone without treating NT as a preferred customer.
Looked at from a slightly different angle, why can't NT simply sell its components to JNPR and other smaller players now? Why do they need the components unit to be public? Isn't it an effort to fool the public sector into giving the spin-off a high valuation so they can use the shares as collateral --- all to benefit the mother company?
I guess if I were an NT shareholder, I'd be glad. But on the other hand, since the shares won't be spun off to shareholders, I wonder if many will sell their NT and buy the spin-off.
Do we have any examples of companies doing this successfully? We know AT&T spun off LU, but to my knowledge they didn't maintain the control Roth's talking about. Rockwell spun off Conexant. How's that set up? Are they independent?
I need to be educated. As they used to say on Laugh-In: Sock it to me!
Pat |
