Avaya Inc. agreed to acquire Nortel Networks Corp's money-losing division that makes phone systems for businesses for $900 million, plus an additional $15 million for an employee-retention program. This marks the end of a drawn-out auction for the operation that started Friday but dragged on until early Monday morning before wrapping.

Avaya, which is owned by private equity firm Silver Lake Partners LP and TPG Capital LLP, beat out Siemens Enterprise Communications for the Toronto telecom- equipment vendor's enterprise business.

The acquisition will make Avaya a more formidable competitor against rival and industry leader Cisco Systems Inc. potentially enhancing the ability of Avaya's private-equity owners to ultimately sell the combined business at a higher value.

The transaction allows Avaya's market share to surpass that of industry leader Cisco Systems Inc. in North America, giving it access to Nortel's blue-chip corporate customers, which include more than 80 of the Fortune 100 companies. Avaya will also be able to expand its distribution capability through Nortel's network of reseller partners.