Why BlackBerry Maker RIM Wants to Buy Nortel's Wireless Biz

[qi:gigaom_icon_lte] It’s been sad, watching the proverbial vultures that have been circling overhead during the past few months, waiting to swoop in and feast off the carcass of a once-exalted company called Nortel. But after being run by a parade of incompetents who set it on a downward spiral during the telecom bubble, Nortel was never able to recover. It filed for bankruptcy protection in January, then moved to hive off its pieces — and that’s when the vultures appeared. (Related Post: Nortel Falls to Telecom’s Tectonic shift.)

The Canadian company has for years been packed with smart people that invented great technologies, among them long-haul optical networking equipment, metro Ethernet gear, IP PBX systems and gear for large wireless networks. Now buyers are looking to pick them up for pennies on the dollar.

Avaya earlier this week bought a piece of Nortel’s enterprise PBX and phone business for $475 million. Prior to that, Radware paid some $50 million for a unit that makes application delivery equipment. And in June, Nokia Siemens Networks made a lowball bid to buy Nortel’s wireless business for $650 million. Given that Nortel does about $700 million in annual revenues selling CDMA gear to the likes of Telus, Verizon, Sprint and others, most thought NSN’s bid wasn’t good enough.

Especially considering the wireless division includes what I think is the juiciest part of Nortel –- patents relating to 4G wireless technologies called Long Term Evolution or LTE. Nortel owns important intellectual property on two key methodologies: OFDMA (Orthogonal Frequency-Division Multiple Access) and MIMO (Multiple Input, Multiple Output). And the owner of these licenses could become a major player in the LTE markets. By some estimates, they could be worth $1 per LTE device sold in license fees, though some analysts disagree.

Whichever way you look at it, Nortel’s wireless business a pot of gold, which is why the company is hoping to sell it for more than a billion dollars. In addition to Nokia Siemens Networks, it’s received a bid from Ericsson, and today rumors emerged that RIM, the Canadian maker of BlackBerry devices, was teaming up with MatlinPatterson Global Advisors, a private equity firm, to make a run at Nortel for around $725 million. But Nortel wasn’t happy with those bids and is instead pursuing an auction, the results of which will be released later today.

So why would RIM want a piece of Nortel’s wireless business? By buying LTE patents, the company would give itself an edge in the crucial LTE-related devices market, not to mention the money it could make off licensing them. In that scenario, RIM could generate revenue off the sale of the iPhone or whatever new LTE-based wireless enabled device Apple might conjure up in the future.