Survey Says: Make a Deal, Mike Z.

By Mark Evans | Published: December 20, 2007

As promised, here’s what “the people” had to say about Nortel’s strategic priorities for 2008.

Topping the list is – surprise, surprise – make a major acquisition with 35% of all votes.

The $64,000 question is what to buy, what to buy. In 2007, Nortel seemed to have major ambitions but fell short in its bid for Avaya Inc. and 3Com, which were both acquired by pesky private equity investors.

The potential targets still on the table include Polycom and Tellabs. And if you really want to go big, how about a deal/merger with Motorola, which is going through its own struggles amid a senior management change.

Another suggestion – listed among the “other” option – was Nortel being sold or merged. Juniper, Motorola and Cisco were all mentioned as potential suitors.

A distant second behind doing a deal was staying the course as many people must believe Mike Zafirovski is making the rights move amid volatile and ultra-competitive market conditions. The question is whether staying the course is viable option, or whether Nortel needs to be bolder to stay competitive.

Slashing costs and selling non-competitive units pulled in 12% of vote, while increasing R&D was fifth with 10%.

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  • A Close Observer

    The $64,000 isn’t what to buy, it’s WITH what to buy? Nortel doesn’t have the cash to buy a company that will make a tangible dent in its revenue base or growth prospects. Neither does it have a stock to use as a currency to use.

    Good luck in 2008.

  • Nick Disappointed

    Close Observer,

    I agree which is why I think they should sell the company.

    ND

  • http://deleted Nortel Watcher

    By mid 2008, the stock will have eroded to the $12 dollar range. At that point, a private equity company will buy Nortel and carve it up. Cisco and Microsoft will consider buying the enterprise business, Motorola will buy the carrier business, Cienna and Juniper will consider the Optical business, and the Services business will be put on an ice flow. We may see some interest from Chinese companies too.

    If Nortel wants to avoid this likely future, they better get out of silo-mode and start leveraging synergies between the different businesses so that the value of the whole is greater than the sum of the silos. At this point, the opposite is true…the sum of the silos is greater than the value as a whole. This makes Nortel low hanging fruit for a private equity company.

  • Novice Investor

    Mike Z, it’s over, you’ve cleaned up the garbage (thank you) now paint the rooms and put a “FOR SALE” sign on the door and see who comes knocking …. maybe Motorola might knock on Nortel’s door and the new company could be called MOTEL ?

    Consolidation in the telecom sector is necessary !

  • nortelhand

    It is time to sell Nortel. The other posts are right on the money. Nortel has no money, Nortel has no (or few) products, Nortel’s people are running scared quietly looking for new employment, Nortel has nothing on the horizon (new products) that will have mass appeal in the market place in the near term (1 to 2 years out). Nortel will continue to sink, and be bought by force if Mike Z does not make a deal to sell this pig. Yes the silos are worth more than the whole.

  • biddingadieu

    its over. Mike Z says another 3 years + to turnaround. This is will be over in 3 years. Silo mentality will not change. nobody cares.

  • http://www.yahoo.com Me

    Nortel and Motorola? How about Notel Motel?

  • Not Observer

    One of the challenges is that Nortel has too many products in some solution areas and not enough in others. One weakness seems to be in their Security Solutions portfolio. It would be difficult for them to catch Cisco, Juniper and Check Point in the Security Solutions area but I do think there is a clear opportunity.

    It would be good to see a comprehensive Security Solution offer (product & services) wrapped around the Nortel – Microsoft alliance. This would give them the opportunity to clearly differentiate from traditional Security Solutions providers.

  • iwishihadmoney

    if i did I would buy it for 9 billion, sell off most of the pieces for 11 billion, settle all the debt and IPO a new brand with remainder that is competitive.

    tellabs is going down the tubes. a bulk of polycome overlaps LG Nortel.

  • iwishihadmoney

    Nomoto Networks. sounds asian. stock could fly on nasdaq like all those chinese ADR stocks.

  • iwishihadmoney

    Nomoto = Nortel Motorola

    Ironically, could also mean short for NO MOre TOmorrow. Christmas season mood. Out of here.

  • Der Doppelgänger

    “By biddingadieu on Dec 21, 2007 | Reply

    its over. Mike Z says another 3 years + to turnaround. This is will be over in 3 years. Silo mentality will not change. nobody cares.”

    I agree. Buying another company now will repeat the Bay Networks fiasco. There is more internal cleaning to do before taking an acquisition step. Otherwise Nortel will buy a company only to destroy it.

    Keywords: too many silos, lack of focus.

  • Clint

    If they’d only hired better engineers …

  • mazda

    Two years into a turnaround that was originally pegged at two years, now three to five (it’ll be four to six next year) – nothing to show. Stock is worth half of what it was when Zapdoodle was crowned. No new products, nothing on the horizon. People jumping ship left and right. Cash flow abysmal for a set of mature businesses.

    Nortel has to be broken up and the pieces sold before it collapses inward on itself. Alternatively, it could be sold to the Chinese (Huawei or ZTE) who could hollow out the R&D and re-use the sales and service people to get a firm foothold in North America.

  • whatever

    There was no discernable R&D in Richardson, just a sweeping “lights out” edict.

  • whatever

    Moto No Go

  • many

    Same with RTP (for years now) even so called “sustaining” moved offshore.

    I remember one day a year or two ago telling an operations manager that nortel needed “labs support” to log into his ATM switch and could we have permission for someone form china to log in that night to look at the problem? He groweled “who’s next? North Korea”? It would have been funny if he had not been making a very good point.

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