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Here’s an interesting scenario: Nortel’s strategic direction is unwinding the company as opposed to becoming an enterprise player.
And here’s how it could pan out:
- Metro Ethernet network (MEN) business is sold to Huawei
- Wireless unit sold to Ericsson
- Enterprise business old to IBM
It fits ... Continue reading »
And here’s how it could pan out:
- Metro Ethernet network (MEN) business is sold to Huawei
- Wireless unit sold to Ericsson
- Enterprise business old to IBM
It fits ... Continue reading »
1 month ago
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What we do know is that the Q3 results will be announced in early November and the commit is to disclose more information on the restructuring plan at that time.
Another possibility would be
- Sale of MEN to Fujitsu
- Joint Venture of Wireless with Motorola or expand current LG JV
- Consolidate Enterprise and Carrier Voice & Applications into a Unified Communications and SOA Applications business, retaining the Nortel brand.
- Refocus Global Services to be the Systems Integrator for the Wireless JV and the delivery unit for the UC & SOA business.
Customers will buy the UC & SOA solutions for the same reason HSBC did as announced earlier today.
1 month ago
This is an upgrade, not a new business win.
1 month ago
So, how is this just an upgrade?
1 month ago
1) I am not convinced Huawei want MEN. Too much duplication: Huawei just announced GPON demo product which is totally different direction from Nortel's WDM PON
2) HUAWEI claim they have same long haull capabilites as nortel and their own eDCO. They also have 40G solution. So what is left: few PBT feartures in aging platform??
3) I already asked on the Buzzboard: the WDM PON project is driven by the LG team, but the talent behind it is the MEN team. They are the ones doing the requirements evolution. The question is, what will happen to the WDM PONafter MEN sale? and is it part of MEN.
The value of MEN sounds like focused around eDCO and 40G, and most of big players have it (except Cisco). So I am note sure what advantages for anyone to aquire this busniess -other than for foot print-.
By the way, SOA effort inside nortel can not be that big. It started last year and it was focused on integrating with "IBM same time and websphere" despite Microsoft protests. If Nortel is banking on their small SOA investment to revive the enterprise business, then we all in big trouble. Nortel still does not have the eco system others have for S/W development. For example, Microsft S/W apps eco system is more than 300 copanies. While I think this is a step in teh right direction, I just can not believe they are sacrificing everything for this
1 month ago
1 month ago
Actually, what I meant is exactly what you mentioned but was not clear when I typed it. What I wanted to say is that every vendor claim they have a solution (either use eDCO or use old DCMs). 40G is not a long term differentiator as many vendors claim they will have it in 2009 or the year after. 100G any vendor can claim they can demo it but customer are in watching mode for now.
I think we both agree that the most advacned vendor in 40G and DCO is Nortel and we should also agree that the only value MEN brings to any buyer is exactly that, 40G and eDCO, but for another year or so. This is what led me to beleive that Huawei may not be interested in MEN except for foot print.
My questions on WDM PON are also valid. It is not clear what will happen to WDM-PON once the MEN talent is sold.
Other things I wrote about SOA are facts and it was very clear during many trade shows that SOA development at Nortel is focused and limited to Sametime/WebSphere.
jokerr, thanks for the reply.
1 month ago
1 month ago
if Nortel does follow this direction?
1 month ago
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Despite all of Nortel's issues, it's still a company that could move from 'terminal' to 'significantly undervalued' very quickly.
I'll argue that the current stock value, which equals a market cap that is a fraction of revenue, is primarily an issue of confidence. Confidence in the executive team and the board to do what it takes to turn the company around. After 3 years, it's clear that they don't have the recipe and are hopelessly lost.
If Nortel were to announce that Pearce and Zafirovsky were stepping aside and simultaneously announced their replacements - and these replacements were known entities with solid track records for *growing* businesses *in this sector or a closely related sector*, I firmly believe that the stock value would surge to several multiples of what it is now in a short period of time. There are no easy or quick solutions for some of Nortel's serious problems but I think Nortel customers, shareholders, and employees would be encouraged and inclined to be more patient if the leadership were repaired. With the right person at the helm, I would plow money back into Nortel myself.
Sigh.
1 month ago
1. Sell MEN for cash in a global market where cash is king (actually czar).
2. Clearly articulate its wireless strategy (which continues to move towards the non-achievable).
3. Articulate a NEW enterprise-centric strategy that MUST include a clear demarcation with IBM and Microsoft, which are currently partners but will be vicious competitors in this space (These guys make Cisco look like a choir boy from North Carolina).
4. Achieving #2 & #3 while occupied with #1 plus current environment takes more time than Nortel has. FOR THE RECORD, I SINCERELY HOPE THEY DO THE IMPOSSIBLE!!!!! --bb
1 month ago
The reason I think this could be achievable is related to my stipulation that the replacements must know what they're doing and must be known and proven entities in Nortel's market segment. This would enable speed of execution and speed of management restructuring. Kind of like what Charlie Giancarlo is in progress with at Avaya right now.
1 month ago
I appreciate your optimism but Avaya’s team hasn’t changed much and they don’t have the pressing issues Nortel does. To paraphrase an old saying: “Nortel is in triage but the surgery was successful” --bb
1 month ago
However, keeping the heads isn't going to solve anything, either. This is the proverbial rock and a hard place.
Replacing "Z" does one huge thing: psychologically it represents an acknowledgement his plan is not in Nortel's best interest and that a change is coming. At that point, the next step becomes crucial and must be done quickly and efficiently: replace him with a known, competent industry CEO, easier said than done.
There are only two replacements that need to occur immediately: Hackney and Roese. Again, if competent replacements are put in place then the turnaround can begin in earnest. No wholesale replacements; it's unnecessary and would be tremendously destabilizing rather than helpful.
Optimum? Not by a long shot, but better than the alternative if Nortel hopes to continue as a major player in the telecomm industry.
1 month ago
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- Metro Ethernet network (MEN) business can not and will not be sold for any price / no one wants it
- CDMA that accounts for almost all their earnings in steep decline can not be sold either / no one wants it
- Enterprise business won't compete in a market dominated by Cisco where no competitor has even come close with this great of a lead
They will not be able to afford paying debt let alone afford even more layoffs as the stock hits the $1 ranges (10 cents pre- extreme-reverse split), with an escalated decline in cash revealed by Nov 6th's Third Quarter results, that is even worse than Nortel's forecasts yet again.
Customers will go on strike all at once fearing they will not be around next year.
...and lastly, we get that formal announcement of a liquidity crisis before Christmas drawing fears to conclusion while materializing this increased anticipation as of late.
1 month ago
The company is still a giant..9 to 10 billion per year in sales with huge installed bases.
You don't really know what you are talking about.
Sure you've made predictions that a monkey could make based on the state of affairs etc. but to insinuate there will be BK or a liquidity crisis?
Nope. Dead wrong there lad.
You'll see.
1 month ago
Let me remind you of few former giants that had billions in revenues: AMC, Burroughs, Compaq, DEC, Lehman, Lucent, Novell, Merrill and many other former giants that today are nothing more than mere business schools’ examples of what not to do! Good to Great or Good to Great, Previously. History is never wrong!...--bb
1 month ago
I remember when Proto was calling for a 70% drop in the pps several times over the past 3 yrs and, sure enough, the stock got there each time eventually. Proto's made comments about CDMA being a mature business for Nortel and its consequences months before analysts reiterated the same.
Keep up the valuable commentary and insight that you've been providing here but on this particular one, I just think you should toss that banana in another direction.
Just maybe BK won't be so farfetched after all since its very possibility as well as liquidity constraints are some of the drivers for a Nortel breakup and/or sale.
1 month ago
Everyone has reason to be pessimsitic about NT but it seems proto has a real death wish for them and the employees over there and I just don't get that?
1 month ago
1 month ago
The only people Nortel has made money for is Mike Z and his team and the shorts. I hat to see what has happened, but that is the facts.
1 month ago
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Lean manufacturing or lean production, which is often known simply as "Lean", is the practice of a theory of production that considers the expenditure of resources for any means other than the creation of value for the presumed customer to be wasteful, and thus a target for elimination.
-Transportation (moving [of] products that is not actually required to perform the processing)
-Inventory (all components, work-in-progress and finished product not being processed)
-Motion (people or equipment moving or walking more than is required to perform the processing)
-Waiting (waiting for the next production step)
-Overproduction (production ahead of demand)
-Over Processing (due to poor tool or product design creating activity)
-Defects (the effort involved in inspecting for and fixing defects)"
When and where I worked at Nortel this boiled down to CYA via countless e-mails, and further e-mail verfications thereof, then cut-and-pasted into myriad documents and action logs at every step, so each these neatly recorded tasks could be e-mailed on up the pipe and analysed.
E-mail is "green" as it generates no paper waste. Duly noted. But it didn't seem to improve customer satisfaction. Neither did removing office light bulbs to save everyone money.
1 month ago
1 month ago
No one knows for certain when because insolvency has not formally forecast by traditionally optimistic Nortel yet. They are trying to sell another key division. We see increased red flags like Moody's warning, Altzman score is outrageously high, increasingly commentary towards this end after struggling so long losing money selling asssets and printing paper to live another day, reflected in the stock price which is now half when they last neared folding, etc..
I would guess by Christmas and I fear their Q3 results will not do them no favors either, especially if they come in even wore than they forecast. Not that they have a great forecasting track record calling $20 a buy just last Aug/07. They also have a poor track record with acquisitions buying revenues. As they sell UMTS, or try to MENs revenues if they are lucky enough to get a buyer which I doubted from inception contrary to popular belief at that time.
Also, I would like to take this opportunity to state for the record I most certainly do not wish any ill will towards their good employees as Clit accuses here, that's fabricated slander and just outright mean spirited. Quite the contrary, I do not like the ongoing layoffs the endless suffering induced by this company on so many lives. Their endless contradictions are sure to foster and fuel staunch criticism. I take no great pleasure personifying the company as a turd and not their good employees.
This company has displayed an endless comedy of error, or some real bad luck since even heads prevailed, with endless aspirations failing, and now time has run out selling assets and printing paper to live yet another day to prolong the inevitable to now catalyzing their death spiral to zero now.
Now, cash cow gravy train CDMA accounting for almost all their earnings has commenced steep decline after already losing money for a decade where I believe this has become past the point of return. I hope I am wrong but I have not been so far.
So, I believe we will get their making front page for the final time, besides the fraud trials, sometime this year as they eagerly try to sell MENS for much needed cash to put more coal in their employees stockings with layoffs. We'll see, this Canadian saga is beyond interesting stuff, it is outright unbelievable. I think a lot more would have been better off if they folded at 43 cents presplit. This 3 to 5 year plan doesn't seem like it is doing ongoing terminated employees shareholders 90% later any favors let alone customers who just might go on strike all at once. It's a car wreck, perhaps worth more in parts than whole, but who wants even parts of them now?
1 month ago
is horrible and they will overwhelmed which will open the door more for current CDMA players like NT, Alcatel etc.
So I don't know why you keep saying CDMA is in steep decline. They are flat and not growing..but not in a steep decline. Just wait on China.
They are not done announcing I am sure.
NT will likely sell of CDMA anyway.
1 month ago
did you see 25% less orders last Q208? CDMA accounts for almost all their earnings!
Never mind China where they buy lionshare in their own backyard and most of NT's business is in North America.
http://www.theglobeandmail.com/servlet/story/RT...
Analyst George Notter at Jefferies & Company Inc. in San Francisco calculated that Nortel's wireless business produced operating profit last year of $911-million (U.S.). The main driver was its gear for a digital cellphone technology known as CDMA (code division multiple access), which generated between $746-million and $774-million in operating profitability.
Even if Nortel is first to get LTE to market, the technology is unlikely to match CDMA for profitability. Mr. Notter describes Nortel's CDMA business as a "gravy train,"
http://www.cbc.ca/money/moneytalks/2008/04/andr...
"Nortel growing its revenue stream in the single-digits in 2008 and 2009, but will see the disproportionate amount of profit coming from CDMA, an area that should experience declining revenues over the next few years."
"even potential customers, to question whether the company will be around five years from now."
Nortel’s revenue and profit come almost entirely from sales of wireless software and equipment based on an aging technology known as C.D.M.A.
CDMA is generating nearly 200 per cent of Nortel's operating income
Unfortunately for Nortel, this cash cow is going out to pasture within the next few years.
the company forecast its CDMA revenues to decline at 4% per year between 2007 and 2011.
But in the second quarter the CDMA business fell 10% year over year. In other words, in 12 months it fell almost as far as Nortel had expected it to fall over 2.5 years
1 month ago
1 month ago
Optical to Huawei, Cisco or Fujitsu. Likely latter two.
Enterprise to IBM.
Wireless CDMA to Ericsson.
Services will be broken up tied to products. NOCs etc will be sold off to India BPOs
This will bring in enough to retire debt, pay out exec severances and shareholders to end the business.