A Pep Talk for Nortel

2009 tip

Hackney is pushing board to get rid of Mike Z. Hack is aggressive about his personal advancement and think mike is avoiding the hard decision of making Nortel an enterprise business and dropping carrier and men

Advice for Z man: If you should find yourself alone in a parking lot... watch out! We all know Hackney's MO.

Steve
Care to expose your source. That is a very serious comment. Blog or not. Do you not understand the impact of your statement?

Ahhh, the Ides of March are upon us, early. Et tu Hackney? ..--bb

You'd better pay attention to your grammar and punctuation. I found it is very difficult to understand what you write. You are better than the person who does not use capital letters in this blog. I also had colleague who grown up here and worked for NT and did not use proper capital letters. How did these guy pass elementary school?

Should read: "I found it is very difficult for me to understand what you write." Then...

(a) colleague/s who grew/had grown up with

this guy/these guys

Come to think of it, Mike Z has a funny accent which distracts from whatever he's trying to say, thus he can't be very intelligent, much less fit to run a serious globo-Canadian corporation.

How did he pass elementary school anway? Oh, thats right, he went to "school" in America. That explains it all.

Less
Is there something you know about American schools that sets you apart? What is your name? What do you do?
Less? Have you ever been a CEO and faced adversity? Please enlighten us. Not being a smart ass here. Just looking to learn at every turn.
Joe O'Donnell

Thanks for the correction. Actually, I noticed the error immediately after I pushed the post button. But there was no way to edit the post. I just want to let people pay attention to what they write.

Forget about Nortel. Who cares! It is becoming irrelevant. But I enjoy reading the comments from people who are still passionate about Nortel. I worked for Nortel/BNR before. I feel bad about what it has become. But things change. Move on! There are things more important that this. It has probably wasted more money that it should have.
If you lost money in Nortel stock. Sell it and forget about it. I remember it was reported John Roth sold all the shared he had. Good move. If you got laid off from Nortel, wish you well. There is life after Nortel. If you are still working for Nortel, please work hard and try to be productive. There are people paid much less and produced more. That's the reality. You have to be competitive to stay alive.

Sorry, I have to make some corrections.

"Move on! There are things more important than this. It has probably wasted more money than it should have. "

Learn to speak some f**kin english.

What is "f**kin"? Does that say something about you?

Oh sorry...I forgot to add the G.
It's the slang version of that popular North American Term.
Get back on the raft you came in on and anchors aweigh.

Haha,

Unless you want to be laughed at, need to clarify your target…-- bb

I admit I am bigoted, because when our first polite, studious-looking Asian colleagues appeared in our labs, I naturally assumed they knew the Way of the Warrior (or, rather, Wirer), but I recall having to teach more than one them the finer points of simple patching - don't just yank, restring, lay 'em across the floor, it helps to mate transmit and receive ends, a plain old LED light made in China or Japan can be helpful, etc. Still didn't help; wild Afros made from patch cables developed everywhere until lab access was limited and the mess cleaned up for free, if not for nothing.

Now that the tables are turning and I assume the instruction is increasingly coming from abroad, is anyone going to give a whit about minor details such as ESD, riser/plenum cable, plant grounding, documentation?

Sadly, to Nortel’s management (and this is almost exclusive to Nortel’s current management) all engineers are created equal so why not go for the cheap ones abroad?

That’s what happens when industrial engineers make only process-centric decisions without any understanding of how the creative element operates or is motivated.

End result? Grossly under-performing company. It all starts (and stops) at the top…--bb

So very true! From what I have seen, Nortel's speed, quality, and efficiency will only continue to erode due to the ham-fisted way that they have gone about outsourcing R&D jobs to China and elsewhere. You hit the nail on the head, because the linked article would have a point, except that it ignores the fact that the new Nortel that emerges from this crisis (assuming it does, and assuming the outsourcing trends continue), will only be a hollow shell of it's former self.

Two things I would outsource to China:

1. Bad medicine manufacturing.
2. Cheap, processed food manufacturing (guaranteed to require #1).

Two things I would outsource to India:

1. Books on American colloquial English.
2. Books on over-hyped English words (not too be used in support calls).

BUT I WOULD NEVER OUTSOURCE ANYTHING RELATING TO TECHNOLOGY R&D OR THE SUPORT OF THE SAME TO EITHER COUN TRY!!!!! -- bb

Yeah, I bet you wouldn't.
As very soon, you will be standing in visa queue either outside Indian or PRC embassy, to get yourself outsourced to India. So many expats I can see today clamoring to get involved in India projects, just to keep their jobs intact……

Care to learn Mandarin or Hindi?

Gayle,

Sorry, I am a job creator and NOT a job seeker…--bb

This is exactly the problem with North American companies !!
The North American centric approach to every thing and even english .
I hope you (broadbandbill) understand that the world economy is no longer dominated by North America or Europe and maybe you ought to learn some Chinese and maybe try to understand some thick accented Indian English :)
And good luck with the no outsourcing to either country mantra..get over it, we are living in a global economy with India and China poised to be some of the worlds biggest economies.
I strongly suggest that you learn Chinese and outsource yourself to China :)

The global village has no universal language so how is global harmony, liberty and justice to ensue, much less basic communication, once the Great Satan is vanquished?

The villagers have long complained that "big" isn't necessarily "good" (generic: "Death to USA!" wink, wink), but then immediately show almost slavish willingness to suck up to the next biggest player, ready to learn their language to spite the imperialist Yankee.

I've worked in Germany, Africa, North America, and visited Asia on businees and for pleasure. I'm not in the least impressed by daily life in the global village.

srs,

Firstly, I am not an American-born person; I was born and raised in the Balkans and, as such, have a pretty good appreciation of the global picture and great disagreement with American-centric perspectives. Not too mention still a pretty thick accent as well.

Having said that, I also see what is being imported into this country and just how bad anything ‘Made in China’ actually is. In fact, as it relates to technology products from Huawei and ZTE one could actually see where “Made in USA” was etched off and covered with “Made in China”. As a collector of oxymora, let me add a new one: Chinese quality.

But I also quoted San Tzu in a previous post so, even though I don’t speak the language, I can certainly distinguish wisdom from cheap and patents-infringed junk.

There, aren’t you glad you picked a fight with me….-- bb

Protectionism is coming back.
Watch what Obama and Harper do together.
Fortress North America---Minus Mexico of Course.
It is time Canada looked after its own.
Unemployment is rampant in Ontario and it is time that swine McFly and the Feds do something about it.
I could give two S***s about China or India and most Americans and Canadians feel the same way. The only reason either are succesful is because dumb, naive citizens of both countriesbuy the cheap crap from those places due to poor economic problems here. Kind of a damned if you don damned if you don't. I tell you this. The common man/woman in North America is sick of seeing people left unemployed here while their jobs are moved elsewhere.
Talkin about a revolution.
Write your member of parliament and Senator Today Folks.
Protest for something worthwhile rather than some ridiculously lame religious, anti war, gay issues.
Remember where you came from. Remember who fought for your identity and remember your race.

I guess we all need to go study some economics :)..The reason Americans are having these problems is because of capitalist government (remember it is you people who elected them). The policies , wars etc have drained out the American govt., in turn affecting the whole world economies.
We need a more socialist agenda in our governance and make sure that we regulate he big corporations so that they are accountable for everything they do.

srs

Agreed on regulation so let’s start with the food processing corporations in China that are key beneficiaries of that ‘drained American’ dollar. I am certain that there is some old, wise Chinese proverb about ‘cleaning your own house first’…--bb

Nokia Siemens board coming back to NT with a decision this week.

Questions are: Why is the stock price still going down if as stated in the article, many institutionals investors are accumulating the stock ? Also, why is none of the insiders are buying ? Why is there seems to be no interest from the competitors to buy all are part of Nortel if again like stated in the article, Nortel products could be profitable for many of there clients in the near future ? Why why, why ???

Ending with "could get back on track" or will get back on track is a stark contrast to his opening statement:
"Shares in Nortel Networks Corp. (TSX: NT) 1 have fallen 99.99% from their peak eight years ago. Bankruptcy talk is growing. Another possibility bandied about is a breakup and sale of parts to rivals.Indeed, many Canadians appear to be assuming it’s virtually a done deal that Nortel is finished... To a large extent, Nortel is a victim of external forces that have climaxed of late into a Perfect Storm."

...when they have already relentlessly tried for a decade in a by far better climate:

He cites "Unified Communications" as an area from which future products to emerge but we all know this is am area dominated by Cisco. Even the bully, MFST claiming to enhance than thwart innovation, like the OJ Simpson of anti trust, is trying to enter UC with their Server products downplaying stepping on Notel's toes in PBX. Cisco's John Chambers has even stated that no one has ever overtaken them with this kind of lead. In all fairness, MSFT could argue they have taken over several others who have dominated markets (Netscape/Explorer, WordPerfect/Word, Lotus/Excel, DBase/Access, etc... to give us less with more of what we don't need from one source) as X-based Linux and Apple without histories of time consuming blue screens of death looming on the horizon in poetic justice without drifting too far off topic here. =)

John Dvorak seems to have summed up Nortel's entry into this market space a while ago, where neither MSFT or Nortel have nothing and both are looking to exit their areas of primary concern. Just Google-search "John Dvoraks Pipe Dream" to see.

Regardless of economic conditions, after already losing money for a decade, it is the CDMA decline not the economy that has created their perfect storm in my opinion. Aging CDMA accounts for almost all their earnings and it has commenced steep decline. Almost all! (90-90% EBT!)

I also question how much the China order he cites will bring in as we see how they bought revenues with BSNL or PEC in the past let alone now. I'd be shocked for even them of anyone to have missed this one, unlike BT.

As for Verizon, they too are cutting back like their other large customer, Sprint, who used others for the long boasted WiMax they later "derisked", They are also seeking to derisk the boasted 4G/LTE future after selling 3G/UMTS from where to transition customers from. Now they try to sell another key asset after printing so much paper where their future inspirations from the days of Neptune are wearing thin. Also not that Nortel is no longer Verizon's largest supplier but Verizon is still Nortel's largest customer.

What if customers go on strike all at once believing they won't be around next year? Things happen fast downward and slow upward, even if they did have anything.

As far as their largest R&D is concerned, this may be part of the problem striving to look large jeopardizing earnings, because it is also the least productive R&D!

Are there any other "future" developments anyone could enlighten us with, Roese already tried and he is gone.
Even if they did have anything, they may not survive long enough to bring these technologies to market, whatever they might be.

In its most objective and optimistic light, I too would focus on what they might have than what they do and under better conditions after losing money for a decade. This author would also have to get more specific with examples beyond than China's CDMA order, belt tightening Verizon, or Cisco dominated Unified Communications not to be disgarded as admittedly hopeful while opening the the stage with the brutal more truthful reality of they just won't make it this go round.

Too wild a speculation even for desperate institutions to entering at 4 cents presplit, they would have better odds in a casino yet drive the stock. With their clout, S&P reaffirming its poor credit rating is nothing new if they make interest payments for now and I stress for now as Moody's warns. Crying wolf to analysts has worn thin, and any future perception woul;d be refelcted in price as it always did trade at a premium.

I'd let the numbers do the talking, not Nortel. Even if they did have anything, which they don't. They follow not lead.

Aside from this article citing all the good news one could muster mixed in with the harsh realities, do they have anything?... anyone? anyone? anyone care to enlighten us what they might have or will have or can have as this optimism from 3 to 5 years, buying opportunities, deferred revenues, single digit growth, revisions, etc, has worn mighty thin and lucky top trade at all after the largest fraud settlement in their own country. Lot of things are the biggest with and none are good. I appreciate any enlightenment though. Any...

To expand (cause I have no life), one of the smartest things Cisco ever did, once they built the channel, was to go outside its pretty good R&D to add products and/or minimize or eliminate time to market. It used its relationship with Sequoia, Kleiner, et al to identify hot start-ups that had differentiated technologies or good market timing. I recollect that they bought Crescendo for $90M based on a lab prototype (and got Charlie Giancarlo in the process) and Kalpana, which enabled Cisco to enter and soon own the enterprise switching market. Ad to that Newport Systems, Berkley Networks and dozen others during the mid 90s. In fact, each year Cisco would announce just how many start-ups it would acquire, because the model worked. (Read on, I’ll get to my point.)

In addition, unlike its future telecom competitors (Alcatel, Lucent, Nortel, Siemens, etc.) Cisco itself is a product of the start-up world so they intuitively understood the benefits of an environment where single-product focus was the rule of the day. Such was not the case with the aforementioned telecom vendors, each having evolved (or devolved, as history will record), losing their competitive edge in the process, mostly due to complacency. Having dealt with each one of them in a previous life, there was a distinct difference between chatting w/execs from Cisco (hungry, sense of urgency and no self-entitlement) vs. the others; it took them months just to reply to a communiqué, if they ever did. Cisco, on the other hand, understood the start-up culture and knew how to leverage it.

Another key difference was the motive for such acquisitions. In Cisco’s case it was purely internal; Cisco had (and still has) what I call ‘strategic intelligence’; it is so well attuned to its markets (at the time there were only 2; enterprise and telecom) it did not need Wall Street pressure or input. Eventually, the others also got into the acquisition game but their motives and inspiration was fear; that is what Wall Street sold them at the time in order to make billions in M&A fees during the 90s. (“If-you-don’t-buy-this-and-that-you-will-lose-market/market-share”, was Wall Street’s mantra).

So, the telecom vendors started buying start-ups (and grown-ups) but the integration never worked. Products, management, culture, entrenched NIH attitudes created ‘us vs. them’ environment and it never dissipated. Even today, the ‘net-heads’ at Nortel (old Bay Networks) still role their eyes when they talk about the ‘bell-heads’ in Canada. Why? The acquiring companies (without exception) had no clue what they were acquiring (new blood, fresh ideas, results - and not process – oriented workflow, etc.). It was done solely to appease Wall Street and not to serve its customer base, and, as such, wasted. Example after example by Alcatel, Lucent, Nortel, Siemens shows bad judgment, bad strategy and bad execution.

Today, the start-up world has dried up; consolidation in the Telco and enterprise markets has killed the incentives for investors and entrepreneurs alike, so that game is gone. Cisco is no longer buying 20-25 start-ups per year. But I see a different opportunity, especially for Nortel. Time to do the inverse.

We all agree that Nortel has great engineers and great technology. What I had hoped John Roese would do is to spin-off several of these internal start-ups into their own entities away from the processes, black belts, internal strife, politicking, etc. I would even use a different location, just get the creative types in a room and let them create. One of the things that creative engineers and developers hate more than anything is bureaucracy; it de-motivates and even kills innovation, which is why great products/technologies from the Nortels of the world never make it to the showrooms.

The new game in town, especially for Nortel, is to take few of these promising technologies, no more than 4-5 per year, and spin them off with the right incentives. Not all engineers are created equal; consequently, their earning potential should not be equal either. By allowing the creative element to create in an environment without bureaucratic restrictions I believe Nortel will see the benefits much sooner (such as time to market). Then, take these products and run them through the corporate processes (manufacturing, sales, marketing, etc.) and watch the sales guys get excited about what they are selling.

To their credit, Lucent did something right by spinning off its enterprise group (Avaya). Can you imagine the cluster#&%^ at Alcatel today if that had not happened. Based on Nortel’s recent announcement it seems as if NT is going back to the ‘silo’ model; each group existing on its own merits (or demerits, as the case may be). Nortel needs to look internally and grab the promise away from its bureaucracy; there is still some time left.

There is a great example down here in Hollywood of this model called Universal Studios. Universal, which was a centralized, fully-integrated organization for decades (produced and developed its content, hired the actors, had its own distribution, etc.) re-engineered itself as a service-only organization allowing the creative community to develop/control its own content.

Nortel should be seriously considering this model; it is the model of the future where human capital is truly leveraged and motivated to achieve optimal results. If we look back at the start-ups Cisco acquired during the 90s, the majority of them were either started or managed by former Cisco employees. Could there be a Juniper inside Nortel waiting to be plucked? Yes, perhaps even several. But it takes vision…--bb

PS—Mark, regret the lengthy post but felt it was important to put things in a historical perspective.

Universal Studios inadvertently reminds me of the film "Frankenstein" in which a scientist brings to life a body cobbled together from sundry corpses via lightning bolt. Its angry, yet also surprisingly robust - much like DMS (neither product all that energy-efficient, tho).

Its downright comical to me to see DMS being sent to China and India where its again grafted together and attached to their quasi-networks with bailing wire in the expectation that a better and kinder switch will eventually emerge.

I think Nortel prefers the model "Made in Japan". 20-30 years go that meant "cheap junk", much like "Made in China/India" does today. But Japan made good. I believe Honda even has cars built by round-eyes in the UK, US and Mexico these days.

I can't imagine all telecoms stagnating as they wait for something new and improved to come out of China's Nortel that we could then graft to our own networks-gone-stale with some leftover bailing wire.

Nortel's "going global" looks more like "survival mode" to me. (Literally) Buy some time "helping poor countries hyperconnect", and also cheap engineers who will perhaps come up witha few items that can be grafted onto our Cisco grid as needed.

If not, well, DMS maintenance in Nigeria will keep 'em all busy for many years, guaranteed. But Nortel brass will also have to maintain a presence there or it all will, without fail, return to the earth from whence it came.

Broadbandbill is basically right about Cisco's approach to acquisitions. Back in 1993, Chambers (before he was CEO), Kozel, Kunis, and Ring (former head of Mfg) came up with the strategy of using acquisitions to bring in complimentary technology and necessary engineering talent to change the dynamics of development cycles and time to market.. Cresceno, the first real acquisition was a CDDI developer. Cisco turned Crescendo into an Ethernet Switch developer and the core of Cisco's Ethernet Switch business.
Chamber's tasked Ullal's team to product management & Kunis' team to drive initial sales.

CIsco has always viewed distribution, service, manufacturing, and cost controls as their four strength pillars. It allows them to enter and effectively compete in any market. Overtime, they have modified tactics and processes. When Cisco bought Linksys (Giamcarlo acqiuisition) to fill a product area gap, it knew that its distribution capabilities would increase volumes fourfold with 12 months and that its manufacturing and cost control capabilities would drive down development and product costs.

Nothing is perfect. Cisco was willing to experience failure in individual acquisitions. Lightstream and TGV were earlier failures but they provided an important learning experience. And unfortunately, Listwin & Kennedy went against Cisco's established wisdom of making acquisitions (Monterry, Arrowpoint, etc). The Listwin / Kennedy debacles forced the reinstatement of more due diligence and controls (and large goodwill write offs).

Nortel has never approached acquisitions within the context of an overall go to market, distribution, and product development guiding set of strategies. Cisco always has taken this approach.

By the way, Charlie Giancarlo came over to Cisco in the Kalpana acquisition.

Thanks Gary.

HRCE,

Thanks, I stand corrected on CG. Monterrey (and a few others) were mercy kill favors to their friends on Sand Hill Road. Also, let's give Volpi the credit as well; he did a great job in due diligence...-bb

Bb-


I ca think of two examples off the top of my head that Nortel could have spun off and in retrospect coild have proven to be very lucrative

1)Nortel's Orbiter- 15 years ahead of Apple's I Phone

2) and the latest was Bill Me Later which of course had a Nortel connection as Mark had previously blogged on.

With 12000 R&D strong,Nortel's engineers are bound to come out with at least a few great ideas per year.

The issue is not with R&D and employee skill nor has it ever been. The issue has been gross mismanagement of these personnel and the lack of direction from the ironically-named Board of "Directors" who have allowed this GEnius executive management team to continue with its foibles.

DJ,

Though this comparison is really unfair to both, to truly understand the difference between Cisco and Nortel all one needs to do is look at their respective board of directors. Outside of McCormick, former CEO of US West, there is no one that qualitatively represents the tech sector. The rest are all professor or ambassador types; very intelligent people out of touch with anything that has the word ‘emerging’ in it.

Compare that to Cisco’s directors: Bartz, Capellas, Chambers, Carter, Halla and Yang; each a tech market powerhouse in their own right. 50 % of Cisco’s board are all tech mavens, and Nortel’s? I am sure they are mavens at something…-- bb

I'm happy to see growing visibility of the issues with the Nortel BoD. At this point, the BoD has become the root of the problem. If Nortel is acquired, this issue will become moot. If not, the next annual meeting should be the turning point. If any of the directors are re-elected through apathy or lemming behavior, then every Nortel shareholder deserves what is happening to their investment. On the other hand, if the shareholders flex their voting muscle and toss out these useless BoD seat-warmers, they can play an active role in putting Nortel back on the road to recovery. We'll see.

imo, a lot more than 'at least a few', but you gotta have a nose for these things...--bb

Spin-offs (or spin-ins) is the best way; keep it small and focused; just like a start-up...--bb