A Look at Nortel

The Report on Business Magazine has a feature story on Nortel and its struggles to pull off a turnaround after more than two years of CEO Mike Zafirovski at the helm.

Interesting read.

[Slashdot] [Digg] [Reddit] [del.icio.us] [Facebook] [Technorati] [Google] [StumbleUpon]
This entry was posted in Executive Suite and tagged , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.
  • Nortel watcher

    Good reading for those new to the stock. It leaves little room for optimism on Nortel which is not the writer's fault but that of Nortel's mgmt. For any lifer currently there, I truly feel sorry for them given the ride they've been through and the sharp turns that still remain before the final stop. Also, if I were looking for a tech job be it sales or product support, this article would dissuade me greatly from applying at Nortel.

    All in all, a lamentable summary of the last decade's going-ons at Nortel.

  • Observer

    Great story that summarizes much of the difficulty Nortel is having based of having missed opportunities between 2002 and 2005 until Mike Z took over. The frustration of management is evident but at some point you have to believe the majority of employees are becoming alienated as many of them have been there much longer than the existing management. I think Nortel is kind or cornered competitively and it will be check mate soon. As I've written many times on this blog, in many ways it was already too late for Nortel to reemerge as a powerhouse even when the current management took over. You could have hired the best management on Earth, but I don't think it would have made much of a difference. When a company is cornered competitively, has declining revenue on existing products and hasn't invested in new products in order to bridge the gap, its pretty tough. I think the previous regime is the one to blame.

  • itsover

    its the same market cap ballpark as Ciena, JDS and a bunch of other focused telecom players with single segment portfolios. With all the product lines there is a lot of value diminishing over time

  • many

    I wonder if that's the same Al Safarikas that used to be a sales/marketing VP at nortel :)

    The quote that resonates the most with me is; “My take on Mike Z: He's a much better operator than he is a strategic thinker,” Sagawa says. “If you gave him a business that was humming along and asked him to make it better, he's probably your guy. If you take a business that's got serious problems and tell him to figure out what it should be in the future, I think it's a struggle.”

  • Another Nortel Watcher

    I usually consider the Globe/RoB to be a pretty impartial publication. But in this case, I was surprised that for the most part the statements from the Nortel execs were pretty much left unchallenged. Some of the historical pronouncements were incorrect and it grated on me that they were given credence without probing.

    Many, I think your quote regarding MZ is accurate – and I think it applies to most if not all GEniuses. They are tuners, not creators.

  • Nortelhand

    The article was historically correct in my view. The question is “Can Nortel turn its self around and become a meaningful player in this business?” I don’t know the answer but so far it is not looking good from a shareholder’s perspective.
    I think most will agree this is a fast and furious business, things can change and change fast when the right “Mouse Trap” is presented to clients/customers. As an analogy (realizing all is not equal) Apple aapl has really come into its own over the years. I remember when people were talking about Apple being a niche player or going the way of the dinosaur, but it has done quite well. It just takes the right “Mouse Trap” and good execution.
    Even bad sales people look good when they are selling a product that is in high demand. Perhaps, if Nortel does not go bust somehow, this ugly duck may become a swan. But it is always possible the fox could eat the ugly duck and that would be the end of the story. Time will tell.

  • many

    BTW. I ran across the mea culpa from Wired magazine to APPL. I had to laugh because all of these suggestions are the sort people (myself included) are making to NT today. I know the situations are not the same (especially in the visionary leadership department) but the parallels are still kind of spooky

    http://www.wired.com/techbiz/it/magazine/16-04/…

  • Fab

    Nice article? What about Steve Jobs head of Nortel? :o ))

  • NewBlue

    “For future products and what's happening now, Nortel doesn't seem to be there for our company,” [one] client says.

    This is a direct result of the company's acknowledged tendency to now do more “farming” than “hunting”. For the last four years the R&D division has been held back not necessarily due to a lack of vision – though that, too, is debatable – but more importantly from a lack of fresh, innovative thought and creative engineering solutions. Actually, the ideas are there but the old guard won't provide a mechanism for reviewing them for applicability.

    It's great (maybe) that Mike Z. is bringing in guys at the executive level with new ideas, but that approach hasn't exactly trickled down to the R&D groups. There is a reluctance amongst the R&D leadership to step away from the current engineering mindset of the old guard and embrace competing ideas and fresher concepts from newer hires, even though the current methods continue to prove unwieldy and insufficient for the demands of the contemporary telecomm market.

    Nortel's engineering solutions are rapidly becoming old and tired, utilizing the same hardware mechanisms and software code bases, just rehashed, recooked and repackaged with a shiny new marketing exterior. They aren't scalable and are quickly becoming increasingly difficult to maintain and extend. Until the old guard accepts this fact and begins to solicit input from the newer hires and genuinely consider the newer ideas as possible components in our newer solutions, Nortel's challenges in the marketplace will continue to mount until they collapse under their own weight.

  • Observer

    Nortel will never be another Apple. I feel safe in making this prediction because the consumer market is drastically different from selling gear to enterprises, carriers and service providers. At the end of the day, infrastructure can never appeal to its end customers the way a phone or I-Pod would to theirs. By the way, I also feel safe in saying that Apple won't do nearly as well as it has because of shrinking consumer spending in the US and a change in attitudes regarding money in general. Consumer discretionary is one area that will shrink dramatically along with any businesses that depend on it. This is most of the US economy.

  • Another Nortel Watcher

    Observer – three points: 1) Nortel could become another Apple story but I agree with you that it won't happen because first they would need a new board and then they would need the equivalent of Steve Jobs. 2) Infrastructure can become extremely appealing to operators if it hosts the right applications and/or devices. Calling name features sold a heck of a lot of infrastructure. 3) Apple may yet ride through this storm better than most. The potential to continue to take share away from the PC market offers them a growth situation in an overall flat market.

    I guess I'm just sick and tired of the excuses. There is no external reason for a 75% decline in Nortel's value since MZ took over. He and his personally selected hires are responsible for the bulk of it. MZ is the new John Scully. A fizzy-water exec couldn't do any more for Apple than a light-bulb exec can do for Nortel.

  • Ex-Nortel

    It is clear that the analyst community is now waking up to the fact that Mike Z and his management team have literally taken the Nortel BOD hostage. The BOD selected Mike Z after they rejected the business plan presented by the 2 Garys. After 2 years of no real results, no new products or revenue streams, and round after round of lay offs, all the analysts can see is negative growth and increased executive pay levels. Gary Kunis forced Bill O and Peter C to fund the Metro Ethernet and 100G Optical product development and forced them to stay in the Optical business – and these are the only new opportunity generating products that Nortel talks about. The BOD is captive to their decision to hire Mike Z and to allow him to put into place a business plan that is clearly failing. By every metric – stock price, revenue, margins, employee productivity – Nortel is a disaster heading towards bankruptcy. The so called business transformation is a joke. The plan will cut over $400M out of sales, distribution, service, and marketing capabilities at a time when Nortel need to desperately grow its revenues with a consistent stream of revenues from all product lines.

    It will be interesting to see if Nortel can roll over the $750M of debt coming due in 2008 and at what interest rate. The 2 Garys wanted Nortel to be a Canadian – American development entity because of the productivity that could be achieved out of Ottawa, Richardson, and Santa Clara. Mike Z believes that India, Mexico, and Turkey will be the answer to Nortel's new product development future. It was & is a very bad call. A very poor management team is holding the BOD hostage because the BOD believes that it can't dump the current management without creating a new round of investor law suits and possibly triggering covenants in its different financing obligations. At the present time, Mike Z has carte blanche to increase the pay out to his team, lay off North American Engineers, and run the company right into chapter 11. One day Nortel will resemble Bear Stearns demise and people will scratch their heads and say 'how about that'.

  • max191

    Great blog here. Keep it up! Please try to include more information if possible.
    regards
    charcoal grill

  • TwitterCounter for @markevans
  • Seeking Alpha Certified