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Mitel sells communications unit for $350-million

Mitel Corp. said Friday it will sell off its communications systems business - along with its trademark name - to companies controlled by founder Terence Matthews for $350-million.

The deal - expected to close in February - makes Ottawa-based Mitel a pure semiconductor business, signalling a "fresh page" in the company's operations.

Under the transaction, Mitel will get a combination of cash, notes and a minority stake in the business. It didn't say how that payment will breakdown or which companies controlled by Mr. Matthews would be making the acquisition.

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"With this announcement, we are taking a significant step in our evolution and sending a clear signal that we will focus on the opportunities and challenges of the communications semiconductor market," Mitel president and chief executive Kirk Mandy said.

"We turn a fresh page on our future knowing that both businesses will be well placed for success."

Mr. Matthews, one of Canada's most successful technology industry entrepreneurs, founded Newbridge Networks Corp. and co-founded Mitel with Corel Corp. founder Michael Cowpland. Both companies now post more than $1-billion in annual revenue. He is also chairman of embattled CrossKeys Systems Corp.

Mitel said it will report the results, assets and liabilities of its communications division as discontinued operations for the third quarter ending Dec. 29.

In announcing the sale, Mitel also said it expects semiconductor sales for the quarter to be about 10 per cent lower, from the $194.3-million reported in the second quarter.

"The decline is principally due to a reduction in the orders normally booked and shipped in the same quarter, and to order rescheduling and cancellations, both resulting from market uncertainties," Mitel said in a release.

"These factors have reduced semiconductor's backlog from $280-million at Sept. 29, 2000, to aproximately $249-million."

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Mitel will release its third-quarter results Feb. 1.

"Mitel Semiconductor continues to benefit from a significant amount of design wins, but is currently adversely affected by customer inventory adjustments in its network access business," Mr. Mandy said.

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