Today, let’s look into our crystal ball to see what the new Nortel look like in a few months based on a couple of assumptions:
1. Nortel finds a buyer for its Metro Ethernet Network business.
2. It also dumps the wireless business or spins it off into a JV.
So, if you take MEN and wireless out of the equation, you’re looking at a company focused on the enterprise, carriers (primarily VoIP), and services.
Note: Got some insight about Nortel’s MEN and wireless sales so number below are updated.
In the process, sales shrink from about $10.5-billion to about $4.8-billion (MEN’s sales are $1.9-billion; wireless, including services, are $3.6-billion).
If the restructuring includes extensive job-cutting, Nortel becomes, in theory, a much smaller, more focused and profitable entity. That’s my take on the approach Mike Z. has embraced.
One more thought on the numbers: If you look at Nortel’s enterprise business, it’s not a very profitable operation that plays in a market where it’s far being a major player. You have to wonder why Nortel is so keen on enterprise given its roots lie with the carriers.
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“You have to wonder why Nortel is so keen on enterprise given its roots lie with the carriers.”
– Because Richard Lowe has mismanaged the Carrier business and the Carrier customer relationships leaving the portfolio in a shambles.
Nortel used to be pretty competent in the enterprise market. They were pretty cutthroat at pricing, and catered well to some important market verticals (health care, finance, insurance, government, manufacturing, energy and technology).
Unfortunately, it seems as if zafirovski has sold their enterprise soul to microsoft and they no longer get any brand recognition for their technical innovation. I do not see any positive impacts to Hackney at the helm, but you can bet he will make the case to poor large amounts for the MEN sale into his business. The rest will be soaked up be well deserved raises for the “boyz”.
In my view, Nortel has traditionally been a strong player in Enterprise but has lost a lot of ground in recent years. Having said that, I believe that their future in this segment is stronger than Mark suggests. They have an interesting portfolio in contact center solutions and self-service applications, and I believe they are now and will continue to be very strong in unified communication solutions. I have no idea what's in the pipeline, obviously, but people I talk to in the company tell me that Nortel's UC vision is very strong. Perhaps the sale of MEN will allow Nortel to make the investments they really need to continue to build this business? While all the news from this company has been almost entirely doom and gloom (aside from improvements in SG&A cuts and gross margin), I still hold a glimmer of hope that this once great company can someday be seen as a leader again.
Mark, here's a challenge for you.
While you are out doing your thing around Toronto the next few days, do a simple survey of how many businesses are using Nortel phones. That will give you a real sense as to their Canadian penetration and the potential opportunities for the future.
Question:
Nortel is a key player in the Vancouver 2010 and London 2012 Olympics. What will the new nortel mean for those high-profile initiatives?
Nortel has a reputation for always being late…very late. In enterprise, customers of Contact Center Express have been waiting for new software release since 2004 and CC Enterprise since 2006. They will finally release an update in early 2009. It's progenitor, Symposium was itself 4 years late. They were horrifically late with SIP support. The basic CS1000 v5 was over a year late.
Now they are embarking on ditching the 35-year-OLD Meridian-based CS1000 code and embracing an open source model with the acquisition of Pingtel. Too little, too late. And it will be a wholesale forklift for customers.
And the Microsoft ICA? I chuckle every time I hear about it. Failure. Microsoft has moved on to their next “preferred provider” (which the rest of the market calls “second-rate loser”) Aspect.
Nortel's biggest problem are executives with such large rear-view mirrors that the road ahead is obstructed making whatever moves they make baffling. “Oh crap, we ran into a wall, we better slow down.”
Though Nortel has a chance to be a player in the enterprise space due primarily of a tighter focus in the post-MEN/4G world, it still has the wrong horses running it. George Riedel’s strategic enterprise wizardry should be matched with an accomplished CTO (and not one that just thinks he is), a rock star division president (and not just an industrial engineer with a new spin) and a top enterprise sales VP preferably not an Avaya/Cisco/Lucent reject. Without these suggested recommendations it will be yet another three long, painful years of more wordsmith-ing. And one last thing; dump the R&D partnerships with MSFT and IBM, these guy are your new enemies Just ask Cisco…–bb
At the moment there are 7 layers of management , My guess is if Nortel does not consolidate that corporate overhead and reduce the layers down to 3 or 4, I cannot see Nortel succeeding.
If anything really deserves to keep the Nortel name it should be the MEN division.
More sell-off of the wireless is inevitable and makes sense as they generate cash but have limited lifespans (read lack of investment has kept them from developing transitional products that are captivating). ALU or Moto would love to snap up the remainder of CDMA market share (read get 100% mind share of VzW) and the GSM BU has a profitable customer list of high growth developing countries. As for LTE, Nortel has some prime MIMO IPR that would make patent trolls like Qualcomm salivate.
The enterprise BU would push any of a number of players (IBM, MSFT, Siemens, Avaya) from being a distant #2 into actually giving CISCO a run for their money.
Hence, all that would be left would be a true core network focused company deserving of the name Nortel
Not sure why Nortel is betting so much on Unified (Unknown) communication (UC). I feel they are betting more on Microsoft or IBM presence than UC itself. IMO, for Microsoft or IBM UC is just another unknown opportunity to explore and might sustain its failure. But i guess Nortel does not have that luxury and it might just fade away. Nortel is being too optimistic about its growth strategy by embarking UC. Here goes a quote on optimism which rightly explains the actions of Nortel
Optimism: The doctrine that everything is beautiful, including what is ugly, everything good, especially the bad, and everything right that is wrong… It is hereditary, but fortunately not contagious
Not sure why Nortel is betting so much on Unified (Unknown) communication (UC). I feel they are betting more on Microsoft or IBM presence than UC itself. IMO, for Microsoft or IBM UC is just another unknown opportunity to explore and might sustain its failure. But i guess Nortel does not have that luxury and it might just fade away. Nortel is being too optimistic about its growth strategy by embarking UC. Here goes a quote on optimism which rightly explains the actions of Nortel
Optimism: The doctrine that everything is beautiful, including what is ugly, everything good, especially the bad, and everything right that is wrong… It is hereditary, but fortunately not contagious
Mark,
The problem with your proposal that Nortel focuses on enterprise and services is that all the services are driven by carrier product sales. If they ditch carrier, then most services go away. On top of that, the services business is as lame as it ever was, dominated by legacy sales of service to support carrier hardware sales. So, Nortel without MEN and Carrier becomes a pure enterprise company. Sounds good..but..most enterprise sales are actually legacy voice sales. Nortel has miniscule market share in enterprise data where it is up against Cisco. So Nortel the enterprise company is comparable to Avaya, a voice dominated company. It is not a bad situation, but it is not great, especially since Enterprise is being run by an Anger Management ex-GE Z-man crony – Hackney.
Nortel still doesn't 'get it.' A new, smaller, Nortel — hip hip horray!!!!!!
Nortel speaks ambiguously about connections between being a “leaner company” and “winning more business” using the same tongues that George Bush used to associate Saddam Hussein to September 11th. The connection is dubious at best.
Leaner is better if you're 350 pounds and Miss Pork Producer North Carolina refuses to go on a date with you. But being lean alone isn't enough to get her attention…you have to have charm, bouquets of roses, and a Porsche convertible that will flatter her and keep her eyes away from that muscleman Cisco guy. Nortel's business plan in this analogy ends at the Weight Watchers meeting.
Management needs to go to charm school and practice lining up a business plan. Or do *something* — anything (!) that allows them to use the words “product development” and “software and equipment that customers really want to buy” and “successful” all in the same sentence.
more – your point is a good one. I believe the GEniuses are simply focusing on what they know how to do. They know how to make cuts and 'streamline' operations, plus very few will argue with them about the wisdom of doing so.
What these GEniuses are NOT doing is articulating and executing a growth plan, which is part of what's required to get Nortel out of the tailspin it's in. Telling the world you're going to dump some of the income from the sale of MEN into Enterprise UC may sound good to the uneducated board, but to me it's just more money down the drain until Nortel installs an Enterprise leader who knows how to spend it wisely.
Guys, this is so simple and obvious – sell off what you can, get the cash and use it for yours and your buddies' salaries for few more years.
The money will last few more years and after that, who cares!!!
Last week the CEO had the audacity to speak to his subjects to state that all of them should continue working normally like “business as usual” while he and his greedy executive team along with the incompetent board work on laying people off. What is sickening is that he spoke about accountability. Of course not his accountability or the board's. They will all be stealing from the company and breaking it up. The moral is at an all time and of course everyone where I work in NT pretty much knows that all these guys are no better than petty thieves.
The remaining employees should all contribute a dollar or two to hire a top gun lawyer to go and rattle the board's cage, like reading them the riot act on fiduciary responsibility and accountability when the facts are so clear. Maybe that would help push the board into some action before the GEniuses destroy what's left of Nortel.
Then send the same lawyer to visit the insurance company that's holding the personal liability policies for the board and cabinet members. Rattle the cage with the insurance company and tell them that class action legal trouble is coming if the board doesn't act. That oughta help stir things up a bit.
its time Nortel employees took to the streets, went on strike or throw some eggs at their ruleing executives.
I remember the old saying that management gets the union they deserve. Nortel certainly deserves a union for their employees and it should be the Teamsters. The greed of upper management, lack of concern for employees and customers, cronyism, and incompetence is monumental.
Death by 1000 cuts. To be a good COO at Motorola is one thing. To believe that all you need to be a Nortel CEO is a good COO is another…operational efficiency overkill. Stop and smell the roses for gods' sake.
exnt
I think your points are well taken.With all that is happening and has happened over the coarse of Mike Z's hiring,I just dare any level manager inside Nortel to come out and justify that they all deserve to keep their jobs and disproportionately high salaries considering the steadily declining financial health.
There are far too many managers inside Nortel knowingly feeding off of Nortel's declining health,all the while just waiting for their turn to come up so they can walk away with a package.
The best thing that can happen to Nortel now,is that someone makes an offer and cleans house,I mean totally cleans house to the point that no curent manager can feed some BS line to justify their department gets a stay of execution like they have done with the GE team.
The lack of any significant transaction since Mike took office, whether it be selling a unit that its managers knew would not achieve the objectives that Z had in mind and instead narrow their focus on areas where they have a chance at winning.Now that all the excess costs have been squeezed out of Nortel's entire organization and having found that it has done little to improve their financial strength,it is only now that it has become apparent as Z has acknowledged “The status quo is not an option for Nortel”,I hope this is the beginning of some significant long overdue changes that are badly needed in order for them to make it against much larger rivals.
I'm sure many will be watching and waiting.
Maybe we should take the “patriotic” approach, as presented by Barack Obama. The remaining employees should all take a cut in pay to finance the executive team's salary for another year.
Yeah, right.
Did you mean to say 'Top and smell the Roeses'?
Some boards are willing to act. Mike Z's performance is right on par with that of the Circuit City CEO who just got kicked to the curb. Both presided over company value erosion in the 90% range. Not many CEOs can add that to their resumes.
http://dailybriefing.blogs.fortune.cnn.com/2008...
Here are some thoughts
1) Low cost centers (China, India etc) don't have unions
2) Low cost center workers won't whine about the executive's performance since the worker knows their place
3) Wages saved on uses low cost centers can be used for more important things like paying the executives huge bonuses.
Get the idea?
Here are some thoughts
1) Low cost centers (China, India etc) don't have unions
2) Low cost center workers won't whine about the executive's performance since the worker knows their place
3) Wages saved on uses low cost centers can be used for more important things like paying the executives huge bonuses.
Get the idea?