$$ Nortel Networks zum Pennykracher $$

OTTAWA — And so it ends. One hundred and sixteen  years after its founding, Nortel Networks has reached a deal to sell all  its remaining patents for a remarkable $4.5 billion to a consortium of  six high-tech giants — Apple, EMC, Ericsson, Microsoft, Research In  Motion and Sony.

The price easily trumped an opening bid of  $900 million by Google for all 6,000-plus Nortel patents, and emerged  after four days of bidding at the New York offices of Nortel's lawyers.

Assuming  the deal passes all the regulatory hurdles, it will be very good news  for Nortel creditors — from pensioners and suppliers to debt holders.  The amount exceeds the $3.2 billion raised to date through the sale of  all of Nortel's active businesses — involving wireless, optical and  telephone gear.

Nortel's top remaining executive said the bidding was "very robust."

"The  size and dollar value for this transaction is unprecedented, as was the  significant interest in the portfolio among major companies around the  world," said George Riedel, chief strategy officer of Nortel.

The  patent haul is also far greater than the several hundred million  dollars former CEO Mike Zafirovski reckoned Nortel would pull in. Of  course, Zafirovski's estimate was made in 2009 near the depth of the  stock market crash.

Nortel expects to close the sale of its  patents by Sept. 30, at which point the firm should have about $7  billion available to distribute to its various creditors. The total  value of the claims against Nortel is still guesswork. The company  estimates these to be higher than $10 billion, but Canadian debtors  alone had submitted 1,011 claims for $29.1 billion as of March 31. Many  of these claims are duplicated in other jurisdictions and will be  rejected by the bankruptcy court monitor.

Nor is it yet  clear how the proceeds will be divided among the different jurisdictions  — mediation efforts led by former U.S. federal district court judge  Layn R. Phillips failed in April. Creditors in various countries have  filed motions in favour of their preferred allocation of the proceeds.  Three weeks ago, the Canadian and U.S. bankruptcy judges indicated it  would be some time before they ruled on the motions. In the meantime,  they suggested mediation efforts continue.

Nortel was the  biggest telecommunication company in the world in 2000, with sales of  more than $30 billion. Even after accounting scandals and mismanagement,  it was generating $11 billion in sales in 2008 — before filing for  bankruptcy in January 2009.

The $4.5 billion raised in the  patent auction could play in favour of Canadian creditors. That's  because the Canadian estate is believed to own most of the patents. The  cash from their sale would therefore come to Canada. However, in  previous sales of Nortel assets, judges have been careful to note that  the proceeds should be held in escrow, with no bias attached to how the  cash is allocated.

Nortel began assessing interest in its  extensive patent portfolio in May 2010, eventually holding talks with  more than 100 potential buyers. Forty companies were keen enough to sign  confidentiality agreements and study the intellectual property in  detail.

The patents run the full range of communications  technologies — including 4G wireless, optical, voice, Internet, data  networking, semiconductors and even social networking. While Nortel had  lost its lead in many of the technologies, the patents are considered  useful in a number of ways.

Research In Motion, which has a  relatively small portfolio of patents of its own, can use the Nortel  assets to develop new products of its own, or defend itself against  patent lawsuits.

Wireless giant Ericsson — which already  has an extensive library of wireless patents — likely made a different  calculation. The Swedish firm earlier paid more than $1 billion to buy  Nortel's wireless technology business, including a number of patents.  Unknown was what percentage of those patents was acquired outright, or  merely licensed. Ericsson may have purchased Nortel's patents to avoid  paying royalties on them.

An interesting footnote to the  Nortel patent auction is the role played by Ottawa's two patent  licensing firms, Wi-LAN and Mosaid Technologies. Both opted out of the  bidding because they couldn't justify spending so much for a relatively  meagre stream of royalties. Unlike the members of the RIM consortium,  they're not in the business of building products. Wi-LAN and Mosaid have  to make the numbers work on the basis of the revenues the Nortel  patents can generate now and in the immediate future.

The  fact that Nortel was able to garner such a large bid says a lot about  the large aspirations of the consortium members. They believe they can  transform Nortel's dormant intellectual property into gold — or, at the  very least, prevent rivals from doing so.

Either way, Nortel's legacy has been split up into pieces and scattered across the planet.

— with files from Bert Hill