As Nortel struggles to become/stay viable, one of the criticisms is Nortel is still a voice networks-centric supplier at a time when data networks have becoming the way to carry voice, video and data.
It got me thinking back to 1998 when Nortel and CEO John Roth made a bold move into the enterprise/data market by spending $9.1-billion to acquire Bay Networks. The much-speculated deal was seen as an aggressive move by Nortel to take on rivals such as Cisco. Here’s how Nortel described the deal:
The transaction creates a new category of company that will be the first to deliver mission-critical Internet Protocol (IP) integrated networks that will reach anyone, anytime, at any place in the world. These next-generation networks will unleash innovation and enable customers to gain competitive advantage and realize their full business potential.
Fast-forward a decade in which Nortel is still struggling to establish itself as a leading enterprise/data player, and you realize how badly the Bay acquisition worked out.
Whether it was a bad deal, a flawed cultural fit or simply terrible post-acquisition decisions, Nortel’s big bet on enterprise/data was a bomb. Imagine how different things could have been if Nortel had bought someone else?
If traditional Nortel business units were doing well now (carrier/cellular) then I could buy this line. However, they are in the tank. This sounds like a mix between nostalgia and finger pointing.
The place to point the finger is rigid carrier centric management that had no understanding how to deal with Enterprise, let alone Enterprise data. The funny thing is that Nortel is now dependent on Enterprise to save the day. If only they had spent a little time and effort to maintain market share 10 years ago this would all be a little easier.
I do think we can all agree that the guy who thought buying Clarify was a good idea, was an idiot. He must have had the Novell disease (we are good at one thing so we must be good at everything).
why_ask_why
I love how people rewrite history. Shortly after Bay was bought, the long haul optical market exploded. Everyone was going to have high speed optical to every home. The money flowed like water into this so Nortel completely ignored data and focused all of their attention and money to this side of the business. During this time Nortel went from number one in the world in layer 3 switching to the bottom of the list. Nortel invested nothing in data R&D and they started canceling all of the next gen products that didn’t work like a charm at the starting gate. Who cares about the data products we are making a fortune of Carrier optical. Then Allen greenspan rose the interest rates one time to many and just about all the capital investment in optical was pulled out. It was the data contracts from Bay that kept Nortel afloat during this time but when the dust cleared they found themselves left far behind in the data world and have since made bad decision after bad decision in their attempts to get out of the ditch. If Nortel bought someone else they would have gone bankrupt a long time ago.
why_ask_why
The article and all the comments are bull. I love how people rewrite history. Shortly after Bay was bought the long haul optical market exploded. Everyone was going to have high speed optical to every home. The money flowed like water into this so Nortel completely ignored data and focused all of their attention and money to this side of the business. During this time Nortel went from number one in the world in layer 3 switching to the bottom of the list. Nortel invested nothing in data R&D and they started canceling all of the next gen products that didn’t work like a charm at the starting gate. Who cares about the data products we are making a fortune of Carrier optical. Then Allen greenspan rose the interest rates one time to many and just about all the capital investment in optical was pulled out. It was the data contracts from Bay that kept Nortel afloat during this time but when the dust cleared they found themselves left far behind in the data world and have since made bad decision after bad decision in their attempts to get out of the ditch.
broadbandbill
The acquisition move was a brilliant vision; the execution, including the integration of the same was abysmal. It was all those ‘bell heads’ at then-Nortel (some of whom are still there and still in a position of power) that laughed at the QoS of data networks, never realizing that these things we call ASICs (or DSPs) and algorithms would eventually solve that problem. Cisco new that but Alcatel, Nortel, Siemens et al preferred not to see the future. Well, the future had arrived and biting pretty hard.
The real sad reality is that Nortel still has a way out (VoIP) but, once again, execution is abysmal. Even more regrettable is that this time vision is lacking as well…--bb
joremero
those 9 billion dollars would be like tons of gold for NT right now...
Guest
It's almost criminal what they did to Bay Networks.
AlfredLee
At the time of the acquisition Bay was on the ropes and dealing with the prior merger between Wellfleet and Synoptics. At the time there were very few companies that could match Cisco. Where Nortel failed was in limiting the innovation between the two companies. There is still very little synergy between the data and voice product lines. Bay had its next generation products on the roadmap but they were scrapped. It was not too long before Cisco gained respect for its VOIP products and how well they integrated across the product lines. The acquisition of Bay Networks was not a bad deal or a flawed cultural fit. The failure has benn and continues to be with the Nortel Leadership. Mr Roth's right hand turn eventually drove Nortel right over a cliff. At the time his vision was right. However, there was never any execution on a single vision. Anyone remember the confusion around INCA and then Succession? Too many false starts and mis-management.
Nortel watcher
ditto that.
Antoninus
Bay Networks was certainly a disastrous acquisition. Part of the problem was that much their optical carrier business already overlapped with an established Nortel business, thus adding a lot of dead weight. Of course Bay was only one part of Roth's terrible acquisition strategy. Does anybody still remember acquiring Clarify for over $2 billion only to sell it 18 months later for barely 10 cents on the dollar in order to raise desperately needed cash?
TongueInCheek
Nortel's Ethernet Switching portfolio that is the key part of their Cisco Energy Tax campaign all have their heritage from Bay Networks.
What Could Have Been
As Nortel struggles to become/stay viable, one of the criticisms is Nortel is still a voice networks-centric supplier at a time when data networks have becoming the way to carry voice, video and data.
It got me thinking back to 1998 when Nortel and CEO John Roth made a bold move into the enterprise/data market by spending $9.1-billion to acquire Bay Networks. The much-speculated deal was seen as an aggressive move by Nortel to take on rivals such as Cisco. Here’s how Nortel described the deal:
The transaction creates a new category of company that will be the first to deliver mission-critical Internet Protocol (IP) integrated networks that will reach anyone, anytime, at any place in the world. These next-generation networks will unleash innovation and enable customers to gain competitive advantage and realize their full business potential.
Fast-forward a decade in which Nortel is still struggling to establish itself as a leading enterprise/data player, and you realize how badly the Bay acquisition worked out.
Whether it was a bad deal, a flawed cultural fit or simply terrible post-acquisition decisions, Nortel’s big bet on enterprise/data was a bomb. Imagine how different things could have been if Nortel had bought someone else?
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