Industry Committee on Aug. 7th, 2009

[Mike Lazaridis]

I think it's clear that we would have continued to grow the investment that Nortel has pioneered. There are excellent employees and high-quality talent there today. Some of them, of course, are leaving the company as we speak.

It's important that we realize that many of the customers Nortel had are also our largest customers today, companies like Verizon. It would have been very easy for us to continue working with those customers and making sure that the technology and development of those products would continue to lead in the industry. We would actually have been able to increase the value of those assets, to increase the value of that technology, because we and major suppliers are already selling to the large customers Nortel had. We would have helped the brand. We would have continued those investments and certainly those people, because without the people, all these assets have no value.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Would you have been prepared to commit to any figures? We're told that Ericsson is committing to retaining 2,500 jobs. Did you have any aims regarding rationalizations or consolidation of operations in order to cut operating costs? By that I mean payroll and staff cuts. I would like you to talk about commitment and about the prospective number of employees.

[Mike Lazaridis]

RIM has over 12,000 employees today, and over 5,000 of those are in technology. We found in the past that it was difficult for us to find really good people in technology and be able to grow as fast as we needed to grow to keep up with the market, the opportunity, and our customers. So certainly the prospect of having that large number of high-quality talent was very attractive to us.

To be clear, we weren't really given an opportunity to get involved and look at the documents and information. We're here because we feel we were excluded from the bidding process. So our intentions are honest and clear. When we take something on, we grow it and make it successful for the benefit of everyone. We just weren't given an opportunity to really understand the transaction or the details. We weren't allowed to do that until we signed the non-disclosure, and unfortunately the non-disclosure took away all the value for us to enter the bid.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Merci, Monsieur Bouchard.

Mr. Braid.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

Welcome to Ottawa, Mr. Lazaridis and Mr. Crow. It's great to see you again.

I want to start by understanding this issue of earlier discussions between RIM and Nortel. You indicated that you had entered into discussions with Nortel. Can you give us an approximate idea of when those discussions started?

[Mike Lazaridis]

The discussions started months before they filed for bankruptcy.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

From your presentation, it sounds as if you were on the cusp of a deal. Can you put it into percentage terms how close you were?

[Mike Lazaridis]

We were close a number of times, and in fact we were so close that we were discussing announcing the deal a few days after we thought we had a handshake.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Were you aware at the time that there was a possibility of the alternate process, the auction process?

[Mike Lazaridis]

Yes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

But you were still surprised when that route was ultimately taken. Is that correct?

[Mike Lazaridis]

There were two aspects to this. First, we didn't know they were filing for bankruptcy when we began the process and thought we had reached a deal. Remember, they weren't selling off their assets at the time. This was based on discussions we had with them, and they thought it was a good idea. But once they filed for bankruptcy, of course, more of the assets became available and we immediately increased the scope of the transaction.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

You had full opportunity to consider participating in the auction process, but you had concerns about the way it was structured. Is that correct?

[Mike Lazaridis]

No. I want to be absolutely clear here. We had a deal and were pursuing that deal, and then the bankruptcy procedure surprised us. That allowed us to open the scope of the deal, so we discussed a much larger deal with Nortel at the time. We felt we had an agreement, but that's when we were informed that they were pursuing other agreements with other companies.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I see. What do you think prevented or stopped the imminent deal that it sounded like you had from actually occurring?

[Mike Lazaridis]

Well, they didn't honour their commitments to us. They changed the deal dramatically, and the more they changed the deal as time went on, all the value that we were interested in started to vanish.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

You mentioned that you had concerns about the NDA and that it was a bit of a showstopper as well.

[Mike Lazaridis]

We had signed NDAs with them. I believe we had signed two different NDAs with them—

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

As part of your earlier discussions?

[Mike Lazaridis]

—in order to begin the discussions and to complete the transaction. What surprised us was when we realized that much of the value had been given to the stalking horse bid. At that point we decided that we needed to enter the larger auction, because it was clear to us that we couldn't complete the transaction as originally agreed to.

When we went to become a bidder, we were given a new NDA, and this NDA had a standstill provision in it, which made no sense in a liquidation event, that we could only bid on one asset and no other assets for a period of a year afterwards. It just made no sense, because they knew what we were negotiating. We almost had a deal. So this new NDA, the provision in it, made it impossible for us to continue in the bid process, because by signing it we'd be giving up the asset that we were interested in.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

What specifically caused, then, the value of those potential assets to significantly decrease in your estimation?

[Mike Lazaridis]

By licensing broad rights to the intellectual property assets and providing broad sub-licensing rights, the best way to describe it is if you found a house that met all your needs and you were very interested in it and started working on an agreement of purchase and sale, and in the final hour you discovered that the owner had given a lifetime lease to another party and then had given them sublet licence for that property. What benefit would there be to you to continue purchasing that house?

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Do I have time for one more question?

Finally, given your presentation, your testimony, what I feel is new information today, have you considered participating in any of the court processes that are part of the overall process involved in this transaction?

[Mike Lazaridis]

We investigated that, but we were advised by our legal counsel that we wouldn't be successful in the U.S. under the terms that were already put in place. We felt that we were snookered.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Braid.

Thank you, Mr. Lazaridis.

Mr. Masse.