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    Nortel’s Biggest Issue: Its Prospects

    By Mark Evans | February 28, 2008

    For all the work that CEO Mike Zafirovski and his overhauled management team has done over the past 2+ years, Nortel seems no closer to being revitalized.

    The stock’s decline to below $10, or $1 when a 1:10 stock consolidation is accounted for, has everything to do with investors growing belief that Nortel’s prospects are, at best, mediocre. When the New York Times’ coverage of your fourth-quarter results is focused on a dim look of what’s head, it can’t be a good sign.

    The question investors have to ask themselves if they are willing to jump into the fray is what one thing will drive Nortel back to respectability. Is there a technology, a product or a trend that will jump-start Nortel’s sales? Sadly, none seems to exists.

    If 2007 - as Mike Z. - said was a crucial year for Nortel, then it could be argued 2008 is one fraught with urgency. Do not be surprised if Nortel’s status as a standalone company ceases to exist.

    Update: Among the “other” answers to the poll below, Metro Ethernet was the most common idea mentioned.

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    Topics: Financials |

    Viewing 7 Comments

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      Everyone should work for the canadian federal public service.
      You don't have to know anything.
      The number one qualification is the ability to speak broken english.
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      • v
      If Nortel is to get out of this, they need products. Products that will be so compiling they can’t be resisted by clients. At present Nortel has nothing more than competitive pricing to move clients, and any client that pushes for Nortel is actually running a risk, no one ever has been fired for buying top tier equipment. But we have all seen people step outside of the top tier and they get waked by a problem. If the problem is big enough, it cost them there job, who would run the risk?

      For the sake of employees and investors Mike Z needs to sell off Nortel, it is too small and has too many problems to rise to greatness in our lifetime.

      PS Mike Z, please stay home next time no other company or employee wants your kind of help.
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      For 2008 I think there are 3 main areas for growth potential, none of which are included in your poll list.

      Unified Communications - relationships with MIcrosoft and IBM (whom own approx. 95% of the global desktop software market) are key as Nortel drives communications convergence into these desktop software elements. A key fact is that the Nortel - Microsoft alliance has generated 600 accounts over the past year or so. Unified Communications is a significantly greater opportunity than Unified Messaging for Nortel, Avaya and Cisco.

      40Gig Optical - Verizon purchased this from Nortel. The solution as I read it quadruples the optical capacity without any change to the physical fibre plant. If you could quadruple the gas mileage of your existing car by changing a few parts, would that interest you?

      Metro (Carrier) Ethernet - PBB-TE (PBT) is very close to reaching formal industry standard designation. No longer is it a proprietary offering. Numerous companies are adopting the technology that Nortel essentially invented.
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      And you expect this will allow Nortel to strive and grow again? In North America?
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      Nortel_will_survive sounds like a Nortel employee trying to drown in the Kool-aid. But I agree the categories are nuts. Nortel plays in the Enterprise (which includes Unified Communications, UM and VoIP), Wireline and Wireless carrier markets.

      Today Nortel's too weak to acquire or be acquired...and it gets worse every day.

      And I am a shareholder...I wipe my butt with the certificates as it's cheaper than TP.
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      I thought WiMAX was going to lead them to the promised land. That and some product called Hyperconnectivety.
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      I agree. Besides all the criticism, Mr. Z. did tons of work to put the company fundamentals back on track from the bottom of the pit where Dunn left it. However, in times of commoditized and cheap products, Nortel yet needs to find its niche to attract shareholders and lift the stock price. Looking closely at the details, this is very evident on the YoY segmented results: Carrier -9%, Enterprise: -3%, Metro Eth: -4%. The only one that made some money was Services with 12%, but the phrase "benefited from the timing of project completion" does not make me comfortable. On the operating margins, surprisingly Enterprise was 0 and not surprisingly the Metro Eth was negative, maybe in an attempt to buy some of Cisco's market. Undoubtedly there is still a very long way to go but if Nortel does not find a new product soon, this way with be shortened very quick. Or it will continue to painfully shrink to 1/3 of its today size before it starts making some real money.
     
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