Nortel could be edging closer to selling or spinning off its UMTS access business in light of some recent organizational changes. In a mini-report, UBS Securities said the company’s GSM and UMTS access businesses have been separated. As well, the vice-president and general managers for Nortel’s WiMax and converged core networks units have “moved on” (fired, reassigned?). UBS expects Nortel’s sales this year to rise 7.9% vs. guidance of high single-digit growth. However, the investment firm said the business landscape is “challenging and there is downside risk to our estimates”. Network World’s Jim Duffy offers his take here.
why not the GSM unit, or even both? Neither GSM nor UMTS meet the requirement of 20% market share. It is highly unlikely that GSM will EVER get there, short of an acquisition.
UMTS, on the other hand is reasonably close, mid teens. It is conceivable that as a result of the Nokia/Siemens combination, that some of their customer would now feel the need to shop. Someone should check who their common customers are. Because carriers feel the need to split their networks for vendor management reasons, a carrier with both Nokia and Siemens equipment would be vulnerable for a change, and hence presents an opportunity for the other players
Also, Nokia-Siemens will feel the need to rationalize their portfolio. That means one of their product lines is going to be orphaned. My guess is that the core network from Siemens will survive and that the radio network from Nokia will survive. Their opposite numbers will slowly die. That presents another opportunity for the survivors.
Of course, in order to be picked for any of these opportunities, Nortel would have to convince the carriers that they are not the wounded albatross that they look like, that a Nortel choice is not something that they would regret in a year or two.
That depends on two factors. Can Z project the right image? Just looking at the stock price, this is in doubt, for now at least. Can the UMTS organization rally to earn these accounts in a sales campaign that will last many months? That is a difficult call. The UMTS organization has been decimated, throughout. it is unclear, notwithstanding all the kudos that Z’s top team has garnered at the top, that Nortel UMTS is in a position for a major fight.
texpat
It’s harder to split GSM/UMTS than access/core. UMTS is viewed as the future, GSM the past. So who’d want to acquire GSM by itself, if its market share is under 10%? There are also synergies among core products, both in platforms and staff expertise, which makes it even harder. So you have to spin out access or the whole thing. The challenges in divesting access are that it’s the volume side of the business (the core products are often discounted if that’s what it takes to land the access sale) and that you no longer have an end-to-end solution (though you don’t have handsets either). So to spin out access, you at least have to convince yourself that you can sell core at a decent margin and grow its market share. But if GSM/UMTS is growing at the expense of CDMA, it might make more sense to spin out CDMA in its entirety.
Darwin
It is possible to offload the core. The core is a software load on a hardware/middleware base that is common to many other nortel markets. The acquiring entity would need to have a deal to source the core from Nortel at the same time that they get the access.
Regardless, most nortel gsm access customers don’t use nortel’s core, so it is a manageable problem. This is an issue also for Mototola which does not have its own core technology.
Why would you want gsm? If you are Z, you don’t. However, milking an installed base even if it has
Anonymous
The WIMAX leader is moving to another company.
UMTS
For information… Since several month 3 strategies were possible according to UMTS management!
-Let it die slowly, with respect to current customers… but with no more R&D efforts for new products.
-Make a JV with a concurrent having complementary products/markets.
-Sell the entity.
It has been annonced 1 week ago that the 3rd option is now done. UMTS is sold. The only thing still unknown (not for long I suppose) is the buyer.
GSM has been separated during the beginning of 2006, now largely outsourced (but all tricky problems were still solved in french R&D, even on the older S4000/S8000 outsourced since many years… So good luck to our customers for the future!) since the BTS18000 is out.
So That’s the way… but that’s no more Nortel…
Godzilla
from what i gather, the lucky acquirer has just become a player in the UMTS business. It is replacing a failed UTRAN product with one that, all things considered, is pretty darn good. They are supplemeting that product with strong relationships at some key carriers, stronger than what Nortel ever had. They wil make good money out of this.
For Nortel, they are shedding a business that bleeds deep red, with little prospect of ever turning around. The analysts faith that Z would turn around and come up with earnings in 2007 will come through. He is improving operational efficiencies, and he is shedding major money drains.
What he isstillnot doing is increasing the top line
UMTS Unit on the Block?
Nortel could be edging closer to selling or spinning off its UMTS access business in light of some recent organizational changes. In a mini-report, UBS Securities said the company’s GSM and UMTS access businesses have been separated. As well, the vice-president and general managers for Nortel’s WiMax and converged core networks units have “moved on” (fired, reassigned?). UBS expects Nortel’s sales this year to rise 7.9% vs. guidance of high single-digit growth. However, the investment firm said the business landscape is “challenging and there is downside risk to our estimates”. Network World’s Jim Duffy offers his take here.