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Nortel To Sell Telecom Operations To Avaya For $900 Million

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Avaya Inc. agreed to acquire Nortel Networks Corp's money-losing division that makes phone systems for businesses for $900 million, plus an additional $15 million for an employee-retention program. This marks the end of a drawn-out auction for the operation that started Friday but dragged on until early Monday morning before wrapping.

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Avaya, which is owned by private equity firm Silver Lake Partners LP and TPG Capital LLP, beat out Siemens Enterprise Communications for the Toronto telecom- equipment vendor's enterprise business.

The acquisition will make Avaya a more formidable competitor against rival and industry leader Cisco Systems Inc. potentially enhancing the ability of Avaya's private-equity owners to ultimately sell the combined business at a higher value.

The transaction allows Avaya's market share to surpass that of industry leader Cisco Systems Inc. in North America, giving it access to Nortel's blue-chip corporate customers, which include more than 80 of the Fortune 100 companies. Avaya will also be able to expand its distribution capability through Nortel's network of reseller partners.