A New, Different and Small Nortel

By Mark Evans | Published: September 17, 2008

In many respects, Nortel’s press release is a major harbinger of a completely different Nortel.

If you read between the lines of the press release and listen closely to the conference call earlier day, you’ll appreciate why CEO Mike Zafirovski describes it as a “pivotal” moment for Nortel, adding that “We clearly understand the status quo is not an option for Nortel”.

The most significant message is Nortel has officially – and finally – decided it can’t be all things to all people. It can no longer remain competitive and viable by developing and selling a broad technology portfolio that meets the needs of a wide variety of carrier and enterprise customers. In the end, Nortel will be a small entity focused on two key business – Enterprise and Carrier VOIP.

“There is a challenge in being highly relevant in multiple areas of business,” Zafirovski said during the conference call. “We are realistic in today’s environment with our blanace sheet as much as a number of us believe we can be successful in various segments, the view is that weill be very advantageous to take some decisions and focus on fewer areas.”

One of the key questions involving the sales of the Metro Ethernet Network business is who will acquire it and what they might be willing to pay – a key consideration given Nortel is looking for the deal to strengthen its balance sheet.

UBS analyst Nikos Theodosopoulos hit the nail on the head when he asked this question:

“The logical buyers in the market are also suffering from similar macro issues and it could cause limited amount of interested parties to buy it given the desire to maintain cash. Have you seen interest expressed recently in that business by motivated buyers willing to pay cah for this business? Or are you entertaining the thought process that it is a valuable asset and buyers will emerge?”

Zafirovski’s responded by saying:

“We will not provide details of context in terms of discussions. We have gone through broad level dicusisons internally and with the board. We have used an investment banker from the outside, and gone thorugh varoius options in respect to growth and opportunities to monetize.”

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  • Vested Interest
    Nasir and others, have any of you ever heard Mike Z reference Jim Collin's book 'Good to Great'. I've been to see Mike Z make two presentations where he spoke extensively about this book being almost as important to him as his bible. I was interested so I bought a copy. Collin's identified 10 companies that have attained 'enduring greatness' by doing 10 things. Mike Z has been 0/10 on these so this all talk CEO probably hasn't read the book and I'm sure with Mike Zs track record I bet Jim Collins wishes Mike would stop mentioning his name.
  • Nasir Khan
    I must say the CEO was very irresponsible, arrogant and inflexible. Until Aug 1st he kept on insisting that revenues will grow by low single digits. Being an invester I have learnt my lesson. Don't trust big mouth CEOs. Also he had no strategic vision for the company. Just cost cuts with no consideration to balance sheet or top line growth, keeping legacy businesses and now decision to sell his top technogy MEN.
  • resigned_in_2005
    Yeah Norhell, that's right - continue to pay for dolts like Owens while you once again start walking people out the door.

    To those good and HARD workers still inside - there IS life outside, and you can make it - just make the effort and push off the rail. Leave them before they label you downsized, optimized, or whatever dumbazz HR label they come with.
  • smilin_bill
    700M in convertible notes that come due this month.

    ouch.
  • smilin_bill
    Surprisingly they have managed to roll this over, not sure what the repayment schedule looks like, but 2011 is the next year they have a large chunk of debt coming due.
  • just_another_nt_employee
    Think the genious is the same. It's very likely that Nortel will experience the same end as Bear and Lehman. A look at today's statement plus a look in the old balance sheets show that Nortel is facing a serious cash problem. If they don't get MEN sold for a reasonable price they won't be able to pay their credits and won't get now ones.
    Chapter 11, is that possible for a Canadian company? I thought that only applies to US companies.
  • right-angle-turn
    Nortel employees. stand in line to face a firing squad. your regime generals will walk away with some nice packages while you are left out to hang and dry. suckers!

    finally you must have heard the crash after the right angle turn. this is the way nortel. business made simple - yup drive it into the ground for a fire sale to make it simple. hopefully Zzzzzz can manage whats left of the business. I hear he is kissing Steve Balmers behind for a job at Microsoft.
  • bankrupt
    hey guys cool off. if it struck a sentimental chord then apologize. I meant it in a lighthearted way because I was there too. but nobody gives a damn about you whether you work hard or not. nobody gives a crap on how quickly you developed a feature or a customer you helped. management only takes care of themselves.

    I also meant to wake up people to reality cuz many still believe in turnaround, improvement, change. just CEO hooey. try get your packages before this ship does a belly flop and ends in a graveyard of busted companies. if you still believe the bs, the advice to buy shares because its a good deal then dont cry later.
  • RAT-Hole-Hater
    R-A-T,

    What in the world is wrong with you.?

    If you lost a lot of money on Nortel and hate the company, hate the CEO, hate the Board, hate the Execs ... I can understand that. But to call the employees suckers immediately invalidates anything meaningful you may have been trying to express. I was a proud NT employee in the 90's and have kept in touch with many people in the company. They're like most people - fathers, mothers, ... most work hard, do their best, try to support their families and save some for later on in life. You are a complete $%^&*)(*()*()*()E idiot to reduce them to "suckers" based on their employer.
  • frontline
    Calling Nortel employees suckers? That is pretty low, we work hard day in and day out. Many of us are Canadians, earning a decent wage, paying taxes, supporting the local economy. I have to question your state of mind that you would wish misfortune upon us....

    Maybe you are still hung up from drinking the kool-aid a few years ago and lost a wack of cash but that is no reason to take it out on the hard working front line employees. We did not force you to buy stock.
  • goodbye
    bye bye. finally the nails for the coffins have started arriving. any employees still beleive the executive s*** that it will turnaround. still drinking that cool aid. ha. its spoiled rotten by now.
  • exnt2
    Total disaster. Mike Z has done what no Nortel CEO has done before. What a frig'g jackass. Thanks for killing a Canadian icon. You must be a Cisco plant Mr. Z.

    MEN gone. Actually it never made sense to have it as a separate business unit and cloning entire product lines. That was Mr. Moron's thought process to get himself promoted to President. Carrier is dead with almost every wireless business decimated. Enterprise is flat but in todays world its going to be a done deal so it will go to Siemens or vice versa with a spin out.

    Past few years Nortels just been doing JVs so pretty much the writing was on the wall. It can finally call itself NOTEL because it has nothing.
  • Slapped
    It's over.
  • Observer
    Its been over for a long time. It just took the popping of the largest credit bubble in history for it to finally be really over. Nortel won't be the only company its over for. I've found Nortel to be a pretty good leading indicator for the broader economy. This time will be no different.
  • Another Nortel Watcher
    Today is step 1 of 3.

    Step 2 will be to sell Enterprise. There is nobody in Enterprise who knows how to grow the business yet it still has some value, so it will be next on the block.

    Step 3 will be to sell the remainder of the business for the value of the Carrier installed base.

    It's possible that steps 2 and 3 will happen together, depending on who the buyer is.

    One thing is certain - there is no way that the current board and leadership team can turn this disaster around.
  • exnt
    So after 3 years of his execs telling him the status quo was no good, he suddenly sees the light??!! I can count at least 10 execs who quit because they thought the company was on the wrong track strategically, so their position was no secret. The sales force has been saying the same thing for years to Mike Z. Now, after wasting 3 friggin years trying 6 sigma, he finally realizes that little Nortel cannot compete in all product lines with Cisco, Ericsson, Huawei, Nokia, Alcatel????? This guy makes the CEOs of AIG, Lehman Brothers, and Bear Stearns look like geniuses!
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