Here’s an interesting quote from Genuity Capital Markets analyst David Hodgson that succinctly captures Nortel’s challenges:
“The big question that looms over the company’s head is: When we look out over three or four years, is Nortel still relevant to their target markets. Nortel continues to cover a lot of bases, and one questions whether the company has the money and the scale to continue its very broad-based approach.”
And that is the same question that every client asks. Will Nortel still be in this business next year? And, What happens to me if they get out of the business I am considering purchasing into?
That will be a very had mountain for sales to clime.
Observer
I'll play devil's advocate. If convergence is a pretty big deal in the networking segment, then it stands to reason that you could make less products for each particular portion of the networking and telecom segments. These analysts can't have it both ways and say on one hand that “Convergence” is coming and then question why Nortel or anyone else can be relevant by looking at the same target market segements from years gone by. My prediction is Nortel will scale back the number of total products but stay relevant by only building products that have the highest of margins in growth segments.
inalmm
Money always exists. Nortel may consider rights issue to strenghten its financial power.
Nortelhand
I was surprised to see that in John Roese’s Blog titled “Our Journey to Transform Nortel” that Peter Look VP or Tax (see item No. 16) and Scott Wickware VP-Carrier Networks (see item No. 19) actually responded to the complaints and questions presented on the blog. I must say I was impressed that those guys had enough respect (or whatever you may want to call it) to answer questions. Responses like that don’t make a company, but it is more than I have gotten from other companies; so to that, they have impressed me.
Now they need to impress Wall Street and move this pig up, so far it has not looked very good. Remember guys, the US may be slowing down but the rest of the developing world is going strong. Lots of opportunities for infrastructure, start winning some.
many
Nortelhand; Actually I think both Wickware's and Look's posts were long winded examples of dissembling and spin. They basically said what others had in many more words and with lots of carefully crafted out clauses.
Basically Wickware said that LTE would be the choice of carriers that has already deployed UMTS/HSDPA and WiMax would be largely the choice for startup (and I should correct him, Sprint because of their spectrum is leaning toward WiMax, but they are in such a mess, I think 4G is fading as a differentiator for them).
Basically what Look said was we are not going to have a better opportunity to write down the loss (and he made the point that the global picture was a consideration, which had not been made before). This means exactly what other have pointed out; it is largely an implied lower guidance for the foreseeable future. I have to say that I doubt nortel would need a “VP of Tax”, if they were not in this bloody mess to begin with or, perhaps I am just too much of a libertarian……:)
Nortelhand
Many,
I think you are right on. But I did appreciate that someone high in the ivory tower/igloo would even take the time to respond. They don’t have to. Nortel is not going to have a good year. Nortel is going to have a hard time convincing perspective clients that they will be in the business 1, 2, 5+ years ahead. If Nortel wins anything, they are going to have to execute to perfection, and clients will always be wondering if Nortel can supply the proper support and support management. Can Nortel pull it off? It is obvious Wall Street doesn’t think they can, and it is looking more and more likely to everyone else that they can’t either.
many
Nortelhand,
I agree it was nice for Scott and Peter to drop in. That said, I was concerned by 1) the “nortel speak” which really said in a lot of words what other people had already expressed more succinctly, and 2) the fact that not much understanding or value was added for all of those words. Again, I point to the difference between “doing” and “being” I tried to make to Phil Edholm.
I have seen this firm grasp on the obvious for a while from nortel senior management. I am still hoping for some sort of insight (or if that fails incite) from the leadership to show me that they understand something about the business or nortel that we do not.
Peters point about the Tax computations being affected by global tax implications was the sole revelation I took away and that was tempered by the *vast* majority of the consideration being a canadian tax implication, which was what I had expected.
JT
So Sad
Daphne
“execute to perfection” – I have been around the company for almost 15 years, and I have yet to see Nortel do this! Execution of plans is much more difficult than execution of jobs.
Daphne
“execute to perfection” – I have been around the company for almost 15 years, and I have yet to see Nortel do this! Execution of plans is much more difficult than execution of jobs.
Hodgson: Will Nortel Remain Relevant?
Here’s an interesting quote from Genuity Capital Markets analyst David Hodgson that succinctly captures Nortel’s challenges:
“The big question that looms over the company’s head is: When we look out over three or four years, is Nortel still relevant to their target markets. Nortel continues to cover a lot of bases, and one questions whether the company has the money and the scale to continue its very broad-based approach.”
Source: International Herald Tribune