Stewart on Nortel

By Mark Evans | Published: September 26, 2008

Duncan Stewart has been following Nortel for a long time as a technology analyst so his thoughts on the company – whether you agree with them or not – are always thought-provoking.

In his latest Financial Post column, Stewart suggests Nortel’s future hinges on its customers. In particular, can customers deal with the growing uncertainty about Nortel’s future? If their faith in Nortel starts to waver, then putting off orders will really start to make an impact.

“In my view, that Nortel can pay its immediate debts and raise some money from the sale of the optical business are not the most important facts. It will all come down to the customers, and the stock market is telling us it is deeply worried.”

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  • broadbandbill

    Duncan is spot on! Convincing customers to believe in the turn-around plan once is tough enough and Z did a great job ensuring customers stay; convincing them twice, especially in the wake of Nortel’s disastrous execution on all fronts is next to impossible. It may have to be yet another CEO; Z used up all of his credits with his customers…-bb

  • Tired

    BB – yell at me if you want, but in fairness, I think Mike Z did one thing particularly well. And I'm saying this without sarcasm and trying to lead up to a joke. I believe Mike has managed to get a lot of control over spending that has traditionally been out of control. He's improved SG&A and operating margins, and I think that the recent R&D re-alignment could very well prove to be a very good idea in the long run. Also, I think under Mike Z that there is a great deal more faith in the numbers (note that I didn't say “forecasts”) being published for quarterly performance. God help me if I'm proven wrong and the company goes back and restates some earning yet again somewhere down the road, but I have confidence now that the numbers reported are valid. Too bad most of the numbers are disappointing. So forgive me, I'm trying to find something positive to think and say.

    Now, to your main point – yes, it's going to be a bitch for Nortel to keep the customers committed. That will take some serious dealing.

  • James Robertson

    I really should give up my job at Nortel and get a job as a columnist or analyst.

    As far as I can see, the job of an analyst is to wait until something has occurred (e.g., X's stock price has dropped) and then issue a statement (e.g., to change the prediction on X's stock price to something lower). That doesn't seem to be too difficult. I could probably manage that.

    And columnists. Do you remember Zoom a few weeks ago? Let's say that you were a potential customer looking to book a flight on the morning that Calgary airport announced it had impounded a Zoom aircraft for non-payment of fuel bills. Would you book with Zoom? No, and nor would anyone else, so the company crashed.

    Does it really need an analyst or columnist to tell us that customers don't buy long-term things (e.g., an airline ticket for next summer) from companies that may not be there to deliver?

  • broadbandbill

    Tired,

    Mike Z. is a true GEnius when it comes to operational issues and built his career on flawless execution on such issues; cost, transparency, biz processes, etc. but we ALREADY knew that!

    It is his leadership that we did not see, which in my opinion includes talent selection and talent placement; Hackney as Pres and JR as CTO of a telecom company were two very poor choices. He also mingled with strategy, a leader needs to allow his people to set the course (Riedel got run over). Lastly, say/do ratio must equal 1 if you want to establish yourself as
    a true leader; his support of Hackney was choice of blind loyalty over leadership and leaders never make poor choices, Mistakes yes, poor choices, no….—bb

  • exnt2

    Z should never have been CEO but President of Operations. That was his focus, maybe strengths. He is not a visionary. He does not know the industry. He dos not have the rapport with customers as the company head.

    20/20 hindsight but I guess there was not much of an option with noone prepared to come to the helm at Nortel. I dont realy think he did much or changed much. Bill Ownes had already settled down the numbers and accounting, brought in people to oversee compliance etc.

    Z only clouded the picture with 6 sigma etc. which just spent money and resources taking time away from things that had to be done at a product level. too many hot shots trying to prove they knew what was best with glossy presentations, meetings and internal politiking.

    All those six sigma black belts (master, slave) and green belts wish you luck. At least you got expensive training and certification for free.

  • Observer

    I'm afraid I cannot agree that Z did good job on cost control, look at the 6sigma expenses and Zero or negative result to be exact! and believe you remember Mckinsey engaged when they start to shape nortel, nothing's free, and the mere cost of building his 'all-star-cabinet' need a big check also……are they doing anything better than thousand of hardworking nortel people? shit, don't know what to say. One thing I admire him! the shamelessness, that's exceptional for sure!!!

  • broadbandbill

    Z did an excellent job of ensuring Wall Street had transparency as it related to Nortel’s numbers; the stock did go up initially. However, what started to unravel Nortel’s position was the combined lack of vision, strategy and execution at the leadership level; at first slowly and later with an accelerated downward spiraling effect. The decision to involve McKinsey early on was a huge red flag that something was fundamentally wrong with the turnaround strategy. It’s not over; it has been over for some time now…–bb

  • Another Nortel Watcher

    bb – as far as transparency goes, all MZ did was not stop the initiatives that the Admiral put in place. Just like all he did at Moto was not stop the RAZR program. I can't point to a single *new* initiative that MZ can take credit for other than the whole six sigma debacle and a boatload of bad hires. MZ is an executor… somebody get his hands off the wheel.

  • less

    Nows an excellent time to go bankrupt if you're looking to excuse your failures. We all tried our darndest but ultimatley its all Wall Streets fault.

  • Tired

    I keep hearing a lot of blame about implementing Six Sigma process improvement at Nortel. Yeah, maybe it was expensive to train staff for this. How expensive? I don't know and most of you don't either. From what I've seen of Six Sigma in many other companies, the benefits of the programs are generally far better in the long run than the cost of implementing. You have your ramp-up costs, growing and acceptance pains, but eventually (most of the time) there's a good ROI. Maybe I'm wrong, but I think a lot of this bitching about Six Sigma comes from people who really don't know what the costs were at Nortel, or were former employees who just didn't like Six Sigma projects being run in their little sandbox. I guess my main point is that there are a hundred other things I would blame Nortel's current position on besides implementing Six Sigma. And in fact, I would be willing to bet that if the programs remain in place for a few more years, assuming the company still exists, they will reap some benefits.

  • MBA School Grad

    Being an analyst means publishing reports that predict yesterday's stock price tomorrow. Not much skill involved, but you do have to have the right vocabulary.

    In the olden days, words like “Buy, Sell, Hold” and antecedents like “Strong” were sufficient. In the modern era of the information superhighway, analysts realized people could make direct comparisons of all their contradictory information, and thus sought to obfuscate their recommendations with words like “Overweight, Action Call Negative, or Inline,” thus making it impossible to do apples-to-apples comparisons.

    There's a whole upcoming generation of low-IQ ADHD teens whose vocabulary is confined to SMS and Twitter — you have the opportunity to overweight a demographic sector that has not yet had coverage initiated in the analyst world. How about “Totally Radweight, Chillaxin', and WTF: Brittany Spears this puppy” as new buy/hold/sell terminology in your new endeavor. And if you keep your reports to 140 characters or less, your clients' Adderall will do its job long enough for you to maintain indefinite employment publishing jibberish.

  • Another Nortel Watcher

    I have nothing against six sigma, or TQM, or any other process quality initiative. They are all about the same thing: predictability, repeatability, and continuous improvement. You can't argue against those goals. However, Nortel's stock price is not at $2.33 today due to having or not having a six sigma culture. Nortel's stock price is where it is because of an increasingly recognized lack of credible strategy and growth potential, combined with a couple of market surprises.

  • one0f34kleft

    a few comments on what has been said.
    6 sigma, that is a joke. nothing has improved but only gotten worse. engineering out of mexico. grade school stuff. can never get the projects correct. complete shipments with out errors. won't happen any more. proccuring parts takes over a week due to customs, (nothig is built on shore any more.) it. was 3-4 days. who do you think pays for the down time waiting for the parts…
    cost containment??? joke.. wireless and optical side of the house was always bleeding cash from poor staffing practices, travel management, lack of material causing down time. product and time given free to customers just to quiet the complaints.. buy two tires and if i bitch enough i will get two more free.
    project managers are useless. in the past we would run multiple projects with out them and the customer was happy. now they have another nortel face to complain about and a hinderance to the troops.
    the pension fund………………2.9 billion,,,,,, billion under funded!!!!!!
    the top and the third level of this company should be canned and then there could be some growth.. every week there is a new commision, group, team created to fix something, well maybe everyone should do their job and fix the things in their house or get canned for poor preformance..

    i can be an analist also but again no one would like what i have to say.

    thanks for your ear (eyes)

  • Nortel watcher

    34K,

    Can you give this board some insight as to what the grapevine says about the coming layoffs and related packages?

    Will politics and who you know play their traditional roles?

    Lastly, how tough do you feel it will be for the survivors to take on the additional workload of those let go?

  • broadbandbill

    Tired,

    As you know, it takes three things to be successful:

    1. Vision >> outbound (in terms of industry positioning/communications)
    2. Strategy >> same as above
    3. Execution >> inbound (including Six Sigma, etc.)

    Is it a coincidence that John Chambers, Scott Kriens, Eric Schmidt, Sam Palmisano, Steve Ballmer, Steve Jobs, etc. have NEVER mentioned inbound programs (e.g.: Six Sigma) to their constituencies (customers, analysts, etc.)? No, because they know no one cares how a company executes, so long it executes…–bb

  • Tired

    Well said. Thx.

  • NT_sphere

    The company executives will still get millions in bonuses while the board is dozing off. If you want to turn this company around then fire the management team, executives and the board. Ah yes the stock prices, well, its very high with these underperforming, incompetent, selfish jokers in charge.

  • Clint

    Anybody in the six sigma program at NT is an employee who should have been booted long ago but they had to give he/she a job because of the old boys network.

  • Clint

    Anybody in the six sigma program at NT is an employee who should have been booted long ago but they had to give he/she a job because of the old boys network.

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