Why Nortel Will Win

By Mark Evans | Published: March 30, 2007

For those of you looking for some insight into why CEO Mike Zafirovski and his team are so enthusiastic/confident about the company’s prospects, check out CTO John Roese’s blog today. He has a guest post from chief strategy officer, George Riedel, who provides the key elements of the plan.

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  • BS Meter

    Yo,

    This guy’s good. Perhaps we should hear from him more often. Perhaps he should have his own blog.

  • jat

    Too bad the investors don’t believe Reidel, or Roese, or Zaboodle, or Hacker, or Currie.. If the market believed these folks, the stock would not be back down near $2.00…sorry $20 (forgot the 10 for 1 reverse split). Maybe everyone is getting tired of all the talk and are waiting for some real results (financial results, not press releases). Nortel execs – you get paid an obscene amount of money, stop blogging and talking and produce some results!

  • many

    I agree with the strategy alright, I just don’t see the tactics.

  • Last Hurrah

    George Reidel’s post points directly to why Nortel has competitive issues when he states “We think we’ve picked the right areas – it’s the execution that will make the difference from here on in.” Nortel’s issues have never been picking the wrong areas of technology (strategy) but always with execution. The lack of new products in the pipeline reveals this.

    Three of the four organic relevant bets Reidel mentions have already been capitalized upon by the likes of Cisco, Juniper, Motorola, IBM, Qualcomm, Alcatel/Lucent, Avaya and other upstarts which Cisco has been quietly acquiring. These areas are also not really “disruptive” but just an ongoing convergence which began after the last tech bust. The only area of differentiation, PBT, may provide a lower cost and less complex network than MPLS, but it would simply take a software upgrade by Cisco, Alcatel/Lucent, Siemens or Huawei once it becomes standardized. Again, speed and quality of execution is the only thing that will matter in a world where network infrastructure costs keep getting pushed down.

    I wouldn’t expect a growth story until 2008 at best but the balance sheet should improve in 2007 and 2008 so Nortel can really go on the offensive with smaller acquisitions. Nortel is better off expanding their services business since margins are higher there. Margins will remain the same or only expand by a few percentage points in the other areas.

  • Observer

    The last line in this commentary says it all:

    “We also know we have lots of work to do. Look for progress on strengthening our balance sheet and turning towards accretive, meaningful ways to strengthen the business. There is more to the story to come.”

    heh, more to come is right, like interest payments, criminal results, dilution, etc., what strengthening with CDMA getting hit in 2008… it is endless

    Did he mean unaccredited because there is no such word as accretive? If he did they should remove their largest asset appearing as a tax credit, that will expire, on books they seek to clean. We see the revisions, extending repair of controls from months to years, pay practices, asset sales, high risk high interest paper with lottery management pay practices as they proverbially cut in their death spiral, and still losing money.

    Cuts and hype headed into 2008′s CDMA hit sure, sure… even analysts are neglecting the loss of UMTS from revenues… what 11B when they will be lucky to hit 10, as green axe-cutter become megalomaniac Mike with auditors and CFO walking, SEC laying charges, and more to come you can be sure.. never mind declining products /marketshare /failed gambles etc., it is endless let alone this hobby farm’s inventions like Neptune

    If WiMax was such the cats meow why didn’t Sprint take it, why always the future that never arrives, the techno-hype never ceases to amaze, they have nothing headed to less and are headed to zero in a handbasket.

    …more to come is right, LOL Nortel? LOL what a joke, this green top heavy management is driving it only harder to the ground with so little changed and so many still there

  • Blogtastic

    I like this blog. It seems to strike the right balance in terms of reporting and briefly passing comment on all areas that is the twisting and turning road of Nortel; and a bit of irreverance is welcome and appropriate.

    On the other hand it’s just a shame that anybody can then post and comment on it though – as I’ve just had to read the bitter (or biased) outpouring that was the Observer’s comments. Either you feel you were wronged, lost money or work for a competitor… Either way I can’t be bothered to respond.

    My own view is Nortel seems to be talking a good game. It makes a lot more sense than in the past, is more ambitious in some ways, but is also more focused on the fundamentals. Just because their top executives are more vocal and visible and getting their messages out there they inevitably open themselves up to more criticism. The crucial thing still remains for the company to deliver though – and the one point made above that is valid is that they still need to deliver a profit, and in doing so put behind them all the restatement and reporting issues!

    Anyway,keep up the good work on the Blog.

  • http://www.techiqmag.com The VAR Guy

    Yes, Nortel has recovered a bit. But 2,500 Cisco partners are in Las Vegas this week rallying around Cisco. It’s an impressive showing. I’m covering the event live at http://www.techiqmag.com. Visit for the top 100 highlights from the event. Andybody think Nortel has this sort of following in the IT channel?

  • Blogtastic

    Rallying round Cisco or bemoaning the fact that there are so many of them that they can’t make any decent margin on selling Cisco? True, I think Nortel’s Channel Strategy is confusing and a weakness, but 2500 Channels is a great strength in someways, but there comes a point where it becomes a potential weakness. Can or will Nortel broaden out and bring on board more channels? Will ICA bring on board more channels? How will Microsoft channels react?

    I think this Channel issue is one of the fudamental areas Nortel has to solve. Box versus box in most areas their products are more than a match for Cisco. But can they get them to the table, put forward by credible partners?

    Interesting times.

  • many

    Blogtastic: I had thought that Nortel had concluded (perhaps incorrectly, perhaps correctly) that there was no margin in commodity router/switch hardware like cisco’s. I thought they were pushing ATCA and Compact PCi as COTs hardware running their propritary sw?

    Cisco’s model is very much like the cell phone handset model, sell as many as you possibly can. Margins are made up in volume and service contracts. What annoys the customer about this is that cisco has so many different boxes running so many different software loads and some many add on “daughter boards” out there that keeping track of it an any large sized LAN/WAN is a major PitA.

    I don’t think nortel is prepared to interested in competing on this playing field?

    So the channel/deleivery and margins would not be apples to apples comparable between the two correct?

  • many

    You know, thinking out loud here, it really is too bad that John Roese is not responding to the questions being asked on his blog. I had hoped that the effort would be more interactive :)

    I do not think he needs to answer for all of the past nortel drama, but I think he really should respond to posts that ask about the content of his posts.

    Two monologs don’t make a dialog.

  • Observer

    Well for some one who can’t be bothered to respond, you just did. Also the following posts mirror an identical writing style on assorted issues.

    The above posts focus on no concrete area of aspiration or where they have improved. Why not say where? Why not point out anything you disagree with then? Was my commentary misleading or unethical with your claiming it was bias and bitter? What you mentioned to look objective are not only lack of profits but the endless events, and trend, outlook, etc., endless facts and the truth of the matter.

    You admit the obvious claiming they need to churn a profit but they haven’t for many years. While you blaming increased criticism on management for being more vocal, since when haven’t they, let alone ever delivered?

    As for your other post, look how Cisco bought Sci Atlanta and how Nortel bought Tasman and PEC. Cisco makes money, Nortel borrows theirs. Outlook is bright in acquisitions and mergers with peers such as Cisco or Alcatel+Lucent, no one wants NT, their liabilities, even if the board allowed their cash cow to be bought contrary to their owners/shareholder’s intent, their numbers were reliable or correct, they were credible, had anything at all short of cutting and selling assets everywhere than growing the business, it is endless. We can go on forever. Where do you see hope, enlighten us then.

    Not only are what you term attempting a sophist twist as painting something irrelevant as welcome here, I think posts like this are necessary in exposing ongoing questionable practices in blogs and who the authors really are.

    As for the last post to circumvent issues to bury others. Are you suggest anyone actually read Roese’s verbose techno-hype too? Sounds like you do.

    Posts are “welcome and appropriate” painting another stage before accounting for why they are “bitter” in contradiction? Facts are necessary and informative to expose the truth as you can see.

  • many

    Observer, I am not sure I understand your rambling post. A grammar check might help. Are you addressing me? If so your focus is too narrow. Read my posts on John Roese’s blog under my same and only blog alias.

    I have asked specific questions, posted specific criticism. I see no need to restate them here for your benefit.

    I really hope the Tasman and PEC acquisitions were not a response to cisco’s scientific atlanta acquisition? If it was, then IMO nortel completely missed the mark.

    Which “cash cow” are you referring to? Wireless base stations? Hahahahahaha. The “visionary leadership” before the last two sabotaged the access business a long time ago, including wireless access.

    As for restating numbers, cisco does it all the time, no one ever says anything about it because they make money. Nortel management makes a complete mockery of a process that is widespread, embarrassing themselves repeatedly for no good reason. If the average nortel employee had to rework their work product as often as nortel’s finance department, they would be fired.

    Yes I do read roese’s verbose “techno-hype” (your words). I find quite a bit of what he says interesting and relevant. I am interested in his perspective, especially coming from broadcom. I am sorry if it goes over your head.

    Unlike some, I do not bash nortel for the sake of bashing nortel. I have many friends still there and I respect their technical abilities. Some of their products are the best there are. I think nortel could be a player in several areas if they would only get focused leadership that had the courage to adhere to their own stated principles and had vision beyond the end of their nose.

    As for the rest of your post, I an nonplused.

  • Observer

    Was the grammar really incorrect oh holier than thou. May I suggest you read it over several times to reassess your comprehension skills instead. By the way, you missed the comma after “if so”. Also, what did you mean by “I an nonplused”? You appear like a tech head trying to flex his artsy muscle with an antagonistic overtone. Give it a rest, two can play.

    I never asked you to restate anything for my benefit as you claim, don’t flatter yourself, the arrogance is overwhelming.

    The comprehension in who I was addressing is as obvious as your response. Obviously, an issue you just as soon circumvent.

    At least to seem objective and gain credibility you agree to the obvious in that PEC and Tasman are a joke compared to Cisco’s acquisitions. However, having what you ambiguously term as “vision” is like asking for telepathy as there are no miracles, albeit the sharpy inspiration is commendable.

    You are also correct in that much of Roese’s posts are above my head, but don’t appologize, it isn’t sincere, and besides it goes over most peoples heads too. Ironic they addressed the general public in their ad campaigns though, especially when they are the only ones without a consumer product.

    I am sure you have many friends at Nortel as you claim. I think this is an understatement. I appreciate the entertainment.

    Your attempts to gain credibility admitting the obvious is deterred by the subliminal and unsubstantiated cheer-leading. If you care to humor me further, elaborate on what you state, “Some of their products are the best there are.” Name them, name any, name even one.

  • many

    Yoiks. Good luck with that attitude.

    Nortel delivered when I was there :) In fact the equal access and centrex products are what gave nortel the edge over at&t and gained them 40% of the NA switching market. Nortel was once a “startup”, but your too young or damaged to remember that fact, sonny.

    I asserted that tasman and pec were not in response to the sa acquisition by cisco. I don’t think they are in the same market niches. I stand by that hope.

    I applaud roese for talking about what he does and thinks. Though you are right, it might be just a pr stunt

    The passport atm product is “the best” atm product out there. Yes it is dated and the backplane throughput is not as high as it could be, but it is running many-many teracells of data in many-many of the largest networks out there. The fact that these boxes are embedded into the network gives nortel a possible way to “evergreen’ their product by evolving it in the network, this is one thing they need to do if they can. So far, I have not seen it.

    The call server/mgw combination based on the dms software is much better (both from a stability and feature content perspective) than lucent, cisco or anyone else can muster

    The ims product is certainly as good as anyone else’s.

    The operta metro optical products are very good (although I do submit fujitsu has an easier to use adm). It is certainly better than ciscos ons454 and 327.

    They used to have a better vpn and branch vpn product than cisco until they ruined (and finally spun off) contivity.

    Nortel is very adept at security, although the alteon blade has not done as well as I think it should have, their crypto sw is some of the best in the world.

    Sure anyone can point out flaws in any product but nortel still has some world class technology and software that competes favorably with anyone else’s. What drags them down is their bumbling greedy management.

  • Observer

    The civility is refreshing indeed.

    If I might argue what they had once is gone and I disagree the SMB products you listed lead with plenty of competition. They are even providing them to India at a discount.

    Nortel was also king of optics and Northern Telecom as a manufacturer was a proud icon indeed but that was then, look at now.

    I am not familiar with their contemporary software products you mentioned or what percentage they might contribute to EBT but Neptune, Titan, and Dolphin speak volumes if we look at past aspirations, let alone past and ongoing acquisitions, as they head into WiMax/MIMO and IPTV, assimilating Voice into Microsoft’s server software with plenty of competition and ongoing decline everywhere. Even their accountability in what sells is unreliable.

    Everyone knows the embarrassing management is still greedy to this day with so many still there as the SEC and police investigate but who’s fault is it they can’t sell product? Marketshare declines right accross the board, excluding backbones which accounts for peanuts? I think this is the only area BT was interested in using everyone else for everything else. This is the only area they have the best of anything, my mistake, make that one.

    Without making money selling anything, how long can they survive printing paper. I do not see a rosy future or that any product is the best or leads anywhere.

  • Last Hurrah

    Observer and many both make valid points. While many refers to much of Nortel’s past success, Observer points out that the are no new products in the pipeline to ensure future success. The only way for Nortel to catch up at this point is via the acquisition route.

  • many

    Last Hurrah; I agree with that statement. Nortel cannot build a layer 3 router to save their lives. I watched as neptune floundered again and again and again (and again). It was pathetic. What they were trying to build vivaci already had, and unfortunately for nortel, fortunately for vivaci, tellabs bought vivaci.

    IMS and their call servers are “next gen” products. If the optical layer ever goes GMPLS (doubtful I think now) nortel had a good handle on that technology. Nortel has a lot of dwdm/cwdm sonet gear out there, and I think they were working on a sonet GFP mapper. That might have legs. There are a lot of technologies considered “old” that are still widely deployed and requiring new development (AIN/Camel triggers for example)

    In the transport area, nortel is very much a layer 2 company. Their layer 1 and layer 2 products are top notch and they often do things out of the box that pretenders to layer 2 (cisco, juniper, tellabs 8860 etc.) do not do.

    A juniper/nortel or tellabs/nortel alliance would be a good fit for nortel, not sure if there is as much of a(any?) benefit to juniper or tellabs.

    The wild card is management. If nortel management prevails history shows they will drag down the other company and its products.

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