3Com may not be the only company Nortel is interested in. The Canadian telecom giant might also be sizing up four others for acquisition, according to an investor bulletin issued this week by UBS Warburg.

Reports that Nortel may be sniffing around 3Com surfaced earlier this week when the Wall Street Journal’s Deal Journal blog posted an entry that 3Com has received interest from private equity firms as well as Nortel. UBS Warburg then issued a report stating that 3Com needs to make moves to boost its traditional business or monetize its assets in the face of private equity activity and investor impatience.

Warburg later in the week issued another bulletin stating that Nortel needs to lift its sagging stock price, possibly through merger and acquisition. In addition to 3Com, the investment firm listed Foundry Networks, F5 and telecom titans Sonus Networks and Tellabs as possible Nortel targets.

“After, what we believe was a failed bid to acquire Avaya, we believe Nortel is likely to seek alternative acquisitions in a bid to either increase scale or accelerate growth in strategic areas including enterprise, carrier VoIP and/or IPTV,” states UBS Warburg analyst Nikos Theodosopoulos in the report. “Since announcing (CEO Mike Zafirovski’s) appointment (in late 2005), Nortel stock is down 30% and we believe Mike Z may look to acquisitions to bolster Nortel's sagging stock price.”

Nortel was believed to have made a play for Avaya before that company was taken private for $8.2 billion by Silver Lake Partners and TPG. Silver Lake is also interested in 3Com, according to the WSJ’s Deal Journal blog.

Given the constraints of Nortel's market capitalization and debt position, combined with the likelihood to do a deal with a large proportion of cash, Warburg believes Nortel would have to look at companies with market caps of less than $2 billion to $3 billion, if valuations are high.

“Given Nortel's emphasis on enterprise and carrier VoIP, and interest in IPTV, we see potential acquisition targets as 3Com, Sonus, and Tellabs,” Theodosopoulos states. “We believe companies like Foundry and F5 are also potential candidates, though we ascribe a low probability to a deal with them.”

Nortel declined to comment on the report.