….But Nortel’s Bullish about 4G

By Mark Evans | Published: February 13, 2008

While investors yawned at Nortel’s speculated JV with Motorola, Nortel CEO Mike Zafirovski was talking the talk about the company’s strong prospects in 4G.

“4G allows us to get a new competitive position,” Mike Z.i told MarketWatch. He added that Nortel is interested in making acquisitions at the right price but declined to comment on the Motorola scuttlebutt.

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  • timmy

    ” '4G allows us to get a new competitive position,' Mike Z.i told MarketWatch …”

    That's nice, but are you able to hang on until the end of the recession?

  • A Close Observer

    “4G allows us to get a new competitive position” – Mike Z

    Actually, it doesn't. They will be easily outplayed by their competitors. From above, they will be easily beat by competitors with greater 3G market share and installed base. These competitors will merely need to grant their customers smaller, yet broader discounts on systems and services to win 4G business.

    From below, they will be beat by competitors like Huawei that have a low cost capability that Nortel cannot duplicate.

    Nortel is the unfortunate victim of having been hugely distracted by internal turmoil during a time of critical industry consolidation and transition. By the time it was able to emerge from this, the game was over.

    Nortel is now constrained by its debt, its weak cash position and the fact that its competitors have scaled, and passed it by. Given this, it has two hopes for survival; (1) be acquired by a company that has the means to be competitive or, (2) fall back to a niche that it can use its limited resources to dominate.

  • Vested Interest

    What does he mean by 4G? Is he still talking WiMAX or is he talking about real 4G like LTE?

  • The psychiatrist

    close observer- your post is total rubbish and it appears that you don't know the economics behind the evolution to LTE.

    Nortel is as much a player in the upcoming 4G race as any other provider, besides when was the last time Huawei won a significant contract with a US carrier?

    Nortel is currently among the selected providers for Verizon's LTE trials .

  • former NT

    1 year ago, Mike Z said it will do the leap frog from 2G to 4G. Even if you cannot believe it, you can respect the wish to do it. Now, go to Barcelona at the Mobile World Congress and check the Nortel booth. There is Nothing to see. Only some TV screen with slides on LTE. No demo, no product, no announcement. Nada. They even restrict the entrance of the stand whereas all the other competitors have wide open space with LTE communication/demo . Pathetic end.

  • A Close Observer

    Psychiatrist,

    I understand the LTE economics /very/ well. However, there are some things they do not change, like, say, competitive market dynamics. As an example, it doesn't change the fact that Ericsson would merely need to (1) provide a customer a competitive price for its own LTE product and, (2) also give that customer a 2% discount across a broader spectrum of its installed base of products and services as a competitive salvo to defeat NT's attempt to secure LTE business. This also mitigates the customer's risk in switching vendors, or needing to perform any integration work to accommodate a new supplier's gear in their network. Ericsson, ALU, etc. would have to view this kind of competition like shooting fish in a barrel.

    As for your Huawei observation, you're – in part – correct. Huawei is not yet a huge competitive threat…in developed countries. They have only enjoyed some recent successes among EU carriers. This will spread, but it will probably take a decade or more. AND…LTE adoption is a few years away. This provides Huawei more time to establish credibility. Further, Huawei is a /far/ greater competitive threat in developing countries – and this is where most of the growth is.

    I also understand that Verizon is NT's most important customer. But, Verizon is only /one/ customer…and not a sure bet, at that. Nortel has had very limited success at VZ as the second, or third, supplier for several technologies – and is not used at all for solutions that Mike Z is pinning NT's future success on…IPTV, IMS, Metro Ethernet, WiMAX (now LTE because of WiMAX's small market share and NT's poor execution).

    As for the your “total rubbish” comment, time will tell. Allow me to suggest, however, that my observation is less total rubbish than your belief that NT is a $26 – $28/share stock in two years. Actually, that's less “rubbish”, and more “fantasy”.

    Regards.

  • Casual Observer

    4G will be more competitive than 3G and cut into margins. Given the credit crisis and slowdown in consumer spending, I'd say consumers won't be willing to spend as much on their cell phones and plans. This will trickle down into the equipment providers and slowdown demand for newer, higher cost services.

    We're entering a new era as credit and debt have people pretty much tapped out. I think carriers will be forced to look to lower cost center based companies for cheaper solutions.

  • Casual Observer

    Not bloody likely ! This won't be your typical recession as its been US consumerism thats driven the global economy for 2 decades now. Now that is disappearing like a mirage in the desert and won't return until trillions of dollars of debt have been written off by the banks.

  • Another former Nortellian

    “Nortel is the unfortunate victim of having been hugely distracted by internal turmoil during a time of critical industry consolidation and transition. By the time it was able to emerge from this, the game was over.”

    Couldn't agree more …

  • Novice Investor

    Microsoft buying Nortel?
    Submitted by Alex Lewis on Wed, 02/13/2008 – 5:25pm.

    In Jim Duffy's NWW article, he goes over the MS/Nortel partnering strategy. Could this be a Microsoft strategy of “try before you buy” for Nortel? Nortel has no real strength in the marketplace outside of its core Voice/PBX/VoIP technology. MS could purchase Nortel , disassemble and sell off the parts it doesn't want. The acquisition would give MS a true end to end solution, like Cisco, but with a much larger installed base.

    Given Nortel's stock price, MS could buy the core business, sell off the undesirable pieces and make this a very attractive acquisition. This wouldn't have much consumer impact, but the SMB through Enterprise market could be profound.

  • ex-nt

    4G was a great opportunity, but unfortunately the market has evolved into a state that is very toxic for Nortel. The LTE business is upgrade business, and the customers will buy from their existing vendors. This gives Nortel opportunities to sell to Verizon, Sprint, etc. Unfortunately, they do not get to sell to the 80% of the market that uses UMTS/GSM. The WIMAX market is turning into a small market for providing internet access in the developing world – Pakistan, India, etc. The market is too small and Nortel has extremely poor sales channels in these markets. For example, Moto and Alcalent are picking up deals in Pakistan, India. So Nortel could get some 4G business, but it will not turn the company around.

  • e5

    former NT, you are wrong. Nortel is doing LTE live air demo

    http://telephonyonline.com/wireless/news/lte-mw…

  • e5

    former NT, you are wrong. Nortel is doing LTE live air demo

    http://telephonyonline.com/wireless/news/lte-mw…

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