OTTAWA — The president and co-CEO of Research In Motion (RIM) says the BlackBerry maker had a handshake deal to buy a prized piece of Nortel Networks’ wireless technology business when the agreement was suddenly scuttled.
The two companies were even trading emails about the wording of a news release announcing the deal, Mike Lazaridis told a parliamentary committee on Friday.
The Waterloo, Ont.-based company was caught off guard when Nortel abruptly filed for bankruptcy in January, he told MPs on the Industry committee.
“We felt like we were snookered,” said Lazaridis, the technical whiz who founded RIM and is co-chief executive of with Jim Balsillie.
Nortel insisted on certain “non-disclosure” conditions that RIM deemed onerous, Lazaridis said, so his company opted not to bid for the fallen high-tech darling during the court-supervised auction process.
He likened the situation to making an offer to buy a house and then discovering, before the paperwork was finished, that the owner had given a lifetime lease and sublet rights to someone else.
“What benefit would there be to you to keep purchasing that house?” he said.
A parliamentary committee heard from Lazaridis and other lead players in the sale of Nortel, formerly Canada’s flagship technology company, which has been selling off parts of its business to various buyers for several months.
The House of Commons industry committee called Friday’s emergency meeting to bring clarity to Nortel’s auction process.
RIM, which has succeeded Nortel as Canada’s most prestigious high-tech company, has made a high-profile plea for Ottawa to intervene to protect Canada’s national interest by ensuring Nortel’s technology doesn’t fall into foreign hands.
Swedish telecom company Ericsson was the successful bidder for a key chunk of Nortel’s wireless technology business while American equipment vendor Avaya has made an initial $475 million bid to buy Nortel’s office-system business through a separate auction.
Ericsson Canada’s president and CEO, Mark Henderson, told MPs the Swedish company will employ 800 more Canadians when the Nortel deal is done and said research and development work in Canada would continue to grow.
“We see this acquisition as an opportunity to continue the tradition of excellence in innovation with Canadian technology jobs being preserved and ultimately more being created,” Henderson said.
Ericsson, a long-time rival of Nortel, has had a major R&D operation in Montreal for years and counts Rogers Wireless among its customers.
But the closed-door negotiations over the wireless unit stoked controversy over claims the process shut out bidders, particularly RIM.
Nortel executive George Riedel told MPs on Friday that Nortel has not been able to use federal tax credits for research and development for the past decade.
Because the fallen tech giant has suffered tax losses since 2001, Riedel said, Nortel has not used the research and development credits to lower its federal tax burden, so the technology that’s being sold hasn’t been funded by Ottawa.
“This is a good deal for Canada,” Riedel said.
Nortel says it went to the Conservative government with two plans to keep it afloat. Nortel sought $1 billion to continue running as a stand alone company, or half that, $500 million, to partner with another firm.
Company executives met federal officials 13 times starting last fall to discuss their plans, Riedel said.
But Ottawa didn’t think Nortel’s plans were viable, nor did it think the Canadian high-tech industry’s fate hinged on the company’s success to the extent the Big Three automakers’ success or failure affects the auto industry, he added.
The government also deemed Nortel’s brand “tarnished,” Riedel said. “So as a result there was no support,” he said.
Opposition politicians and others have called for a government review of the sale, with many concerned that Nortel’s valuable wireless technology will be swept out of the country.
Though RIM has complained that it was shut out of the auction that saw Ericsson scoop up assets from the insolvent telecom equipment maker for $1.13 billion, Nortel said it gave the firm plenty of options and opportunities to make a bid.
“Anyone who could bid was allowed to do so,” Riedel said.
Those who objected to Ericsson’s bid were offered a chance to present their case in both U.S. and Canadian courts, but judges on both sides of the border said they were satisfied that the Nortel assets were being sold at a fair price.
Nortel filed for creditor protection in the United States, Canada and elsewhere in mid-January, battered by the recession and a downturn in its market that derailed a restructuring effort.
Since then, it has begun a process to sell pieces of its assets in separate auctions. The company is preparing to receive bids for its enterprise division by Sept. 4.
Filed Under: Infrastructure