Bankrupt Nortel will sell its global enterprise assets to Avaya for $475 million, but will launch an auction to solicit higher bids.
The agreement also covers its government solutions and DiamondWare business units, Nortel said.
Avaya and Nortel have entered a "stalking horse" agreement, meaning Nortel will be free to take higher offers, but Avaya may then be eligible for a break-up fee.
Nortel entered into a similar agreement with Nokia Siemens over its CDMA and LTE assets, with NSN bidding $650 million.
"We have determined that the sale of our businesses maximizes value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible," Nortel CEO Mike Zafirovski said.
Zafirovski toldReuters that Nortel expects to sell the last of its business units - its Metro Ethernet Networks division - by the end of the quarter.
The stalking horse arrangements mean private equity firm MatlinPatterson may still be able to exercise its plan to keep Nortel intact by buying the company whole, if it can secure enough capital to do so.