It has certainly been anticipated that the recession would force telecommunication markets (not unlike other industry sectors) into further consolidation. The enterprise telephony space, for example, has long been struggling with slowing revenue growth, limited differentiation opportunities and rising competition from non-traditional vendors such as open-source telephony providers, Microsoft, Skype, mobile carriers (somewhat indirectly, through increasing usage of mobile phones for business purposes), you name it.

Although we have no sufficient evidence on what is going to happen with Nortel, we can speculate based on recent news about M&A negotiations taking place and some general marketplace analysis.

At this stage, it just does not seem likely that Nortel is going to make it through bankruptcy protection intact. Rumors that Avaya and Siemens (probably among several others) are in acquisition talks with Nortel for its enterprise business unit should not be surprising. In tough economic times, as demand shrinks, there is no space for too many similar vendors. Also, acquisition costs are at an all-time low, so if anyone is striving for market share growth, this is the time to leapfrog ahead of the competition with an acquisition rather than waiting for slower organic growth.

Nortel’s enterprise business is attractive for several reasons. Nortel has some great telephony, messaging and UC technologies, leading contact center solutions, a large installed base and a loyal channel. Yet, the value of this business to its different competitors will not be the same.

With Siemens Enterprise now financially more stable with the Siemens AG and Gores Group joint venture, it is focused on growth and market expansion. A potential acquisition of Nortel’s enterprise unit could provide it with an immediate access to a North American channel and customer base. Further, from a UC point of view, there are opportunities for eventual synergies. For example, both vendors have partnerships with Microsoft for the delivery of unified communications solutions to business customers. A potential merger will position the new entity very competitively in the enterprise communications marketplace.

Some industry pundits claim Siemens and Nortel have similar technologies; yet, in my opinion, there will be major redundancies as well (e.g. MCS vs OpenScape, large-business telephony platforms, etc.). One of the most significant advantages is Siemens’ open standards approach which allows it to integrate with multi-vendor IM/UC and telephony environments. Finally, both vendors have been on track to become “services” companies for some time now, which could help the new entity more easily align resources under a common vision and consolidate business operations.

Avaya could also benefit from a potential acquisition of Nortel’s enterprise unit as it will emerge as the undisputed North American telephony leader, with a compelling global market share and a significant advantage in the SMB space. The two companies are believed to have a similar customer base described as fairly “risk-averse”, i.e. inclined to work with incumbent vendors with a proven track record of delivering reliable enterprise telephony solutions. Also, Avaya has committed to expanding its channel partnerships and further shifting sales towards a more indirect model, and access to Nortel’s partner base can help accelerate this trend. Finally, Avaya can thus get a hold of some of Nortel’s more advanced UC technologies such as MCS and other solutions already interoperable with Microsoft’s UC portfolio, which will position it even more competitively in the evolving UC space. Needless to say, there will be various portfolio integration challenges and redundancies as well.

Although Alcatel-Lucent is not mentioned to be in any active acquisition talks with Nortel, no doubt, it could also benefit from the opportunity to grow its North American presence leveraging Nortel’s customer base and channels. It could also use Nortel’s technologies to enhance its UC portfolio, which at present, is somewhat less complete than those of its telephony competitors.

Cisco, on the other hand, as stated in other commentaries in the press, may really consider a potential acquisition less beneficial given its proprietary technology approach and anticipated greater difficulty in integrating Nortel’s technologies into its portfolio. It should be noted, however, that Nortel’s contact center solutions could greatly enhance Cisco’s enterprise portfolio as it is somewhat behind its competitors in that market segment.

There are others that could perceive benefits in acquiring Nortel’s enterprise business: Aastra, Microsoft, NEC, etc. Yet, with no evidence of actual activity taking place, I would hate to go into pure speculation at this point.

I will postpone the discussion of other potential advantages and disadvantages of the above scenarios until an acquisition actually takes place. We should not exclude the possibility of a non-telephony vendor acquiring Nortel’s enterprise business. Let’s not forget, however, that there is no vendor or financial institution that is not experiencing some difficulties today. Therefore, a potential acquisition will have to be very carefully considered and tightly aligned with the vision and strategy of the acquiring entity.