Nortel Predictions for ’09

By Mark Evans | Published: December 31, 2008

crystal ball
Everyone’s into end-of-year lists so here’s what I see after looking into my AAN crystal ball.

1. The metro Ethernet network business will be sold – probably to Huawei – for between $500-million to $750-million. Nortel will proclaim it’s a great deal that will help with its new focus on software, service and VoIP. Analysts and investors will not be as enthused.

2. Mike Zafirovski remains CEO even though there’s speculation he’ll be fired in 2009. The company’s in too much flux and uncertainty for the board to turf Mike Z. Meanwhile, few high-quality would be willing to take the job.

3. More cost-cutting and employee reductions. When Nortel announced 1,300 job cuts in November, it was seen as a minor move as opposed to what was really required. Expect Nortel to do another round or two of cuts to reduce operating costs.

4. After disappointing fourth-quarter results, the stock drops to below 15 cents. Nortel shares are delisted from the NYSE for not trading above $1.

5. As social media becomes more of a corporate communications, marketing and sales tool, Bo Gowan, who runs Nortel’s social media operations, is poached by a company looking to boost its social media activities.

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  • broadbandbill

    1. US Government ‘motivates’ Cisco to buy MEN in exchange for future favors (No way MEN ends up at Huawei; just can’t see that happening).

    2. If MEN gets sold in Q1, Mike Z. has another year; if not, he’s gone by Q2.

    3. The cost cutting will continue ad infinitum.

    4. Only a big PR headache; NT will still be listed on TSX.

    5. Bo Gowan stays till the end!

  • protosphere

    1. MENs will not be sold. Nortel will seek insolvency protection instead.
    2. Too late to get new CEO during last days, ultimatum green CEO goes down with the ship in 2009
    3. Won't reallocate more cuts before delisting and bankruptcy
    4. Delisted on all exchanges same day with pre-announced last trading date
    5. dunno what Bo will do… =)

  • Many

    It will be revealed that Zune was a joint NT/Microsoft project.
    http://gizmodo.com/5121311/reports-30gb-zunes-f…

  • brett5

    1. MEN + Enterprise is sold … deal announced in Jan
    2. JV with Ericsonn for carrier networks
    3. MZ stays through transition to JV
    4. Stock goes to $2 after JV news

  • Many

    This is fun! I ahve some more :)

    Nortel will screw up the sale of MEN and the products will die a slow and agonizing death being replaced with Juniper over a period of years.

    Zafirovski wrings last cent out of shareholders, employees and anyone else stupid enough to get involved with him and retires, eloping with Hackney to a private island in the Caribbean owned jointly by Charles “Bebe” Rebozo, John Roth and Paul Stern.

    Jean Monte takes the remains of the company private and moves it to Newfoundland.

    Bo will write a book entitled “What happened, eh?” and he is immediately sued into bankruptcy by Scott McClellan.

    George Bush pardons Frank Dunn on the last day of his presidency.

  • http://www.allaboutnortel.com Mark Evans

    Nice one!

  • Ex_Nortel

    Companies do not do favors – especially for the Canadian Government. Boeing got severely burned in the 80s doing a 'favor' for the Canadian Government by buying De Havilland after a whispered promise of plane purchases – Air Canada waited a month and then bought planes from Airbus.

    Who exactly in the US Gov't would be offering to do a favor for Cisco to waste money to rescue a Canadian Company when Nortel's collapse directly benefits Cisco (and Nokia, Huawei, Ericcson, etc.)

    My predictions:
    1. Nortel will probably preannounce Q4'08 numbers before January 15th or Q2'09 numbers before July 15th, declare Chap 11 bankruptcy, skip paying out $108M to bond holders, and file a reorganization plan with the courts in an attempt to overwhelm unsecured creditors and bond holders.

    2. MEN is sold by Nortel in a 363 sale to provide DIP funding.

    3. Nortel creates a PR firestorm by dumping its pension liabilities into the lap of the Canadian Government.

    4. The bond holders do not approve of the final reorg proposal and Nortel is eventually into pieces and sold off. A small rump company emerges out of bankruptcy with the rights to Nortel's name and some of its businesses.

    Poorly run companies without a reason for being die. Bloated companies that choke on their own mismanagement and mistakes fall into bankruptcy and sometimes emerge in a focused and very slimmed persona (like K-Mart).

    Too many people are looking for a fairy tale ending for Nortel. Nortel was a doomed dinosaur the day it was spun out from BC. Fairy Tale endings only happen in fairy tales.

  • Texan2

    Ah, Mark… I have to commend you for finally showing your true color. Any previous claims from you about being fair and balanced should now be off the table (or is that the Faux News that I am confusing your blog with)?

    There is nothing in your crystal ball that says Nortel will survive. I hope you frame these prophecies and be ready to eat crow by mid 2009.

    PS: I am not expecting you to actually allow this comment to be posted, but at least I am letting my views known to you. My wishes for a Happy New Year, even though your crystall ball doesn't seem to want to wish anything good to Nortel's shareholders!!

  • TongueInCheek

    A few thoughts for 2009:

    1. MEN is sold, most likely to Cisco for approx. $1.25 Billion in Cash. This will see approx. 1,250 Nortel employees shift over to Cisco.

    2. Nortel and Ericsson enter into a Wireless Joint Venture with Ericsson having primary control for the JV. Approx 8,000 Nortel people shift to the JV.

    3. Carrier Voice unit is merged into the Enterprise Business which then gets re-branded along the lines of an End-to-End Unified Communications Systems. Approx. 10,000 people are retained in this primary business for Nortel.

    4. The Canadian Government gets defeated in a Non-Confidence motion related to the Budget on Jan. 27th sending the country into a 90 day period of turmoil as a new election will be called. As a result of this turmoil the Canadian economy is hit hard which impacts Nortel and many other corporations leading to more layoffs because of the uncertainty.

    5. The Nortel – Microsoft relationship weakens as Microsoft believes they have a fully ready IP PBX replacement solution with OCS R2 that launches in February. This helps to cause a tighter relationship between Nortel and IBM with their joint SOA initiatives moving to “the Cloud” as a subscription service for businesses with Nortel and IBM customer end-points.

    6. All About Nortel continues as the official home of false accusations against Nortel and their people.

    7. It gets revealed that Mark Evans and Yes4appl are actually the same person as this is the primary driver for negativity and false statements which brings increased traffic and increased revenues for the site from the ads.

  • broadbandbill

    T2,

    Not sure what blog you are reading but nothing in Mark’s predictions states Nortel will not survive; only that ‘the future will be more like the past, except longer’ (quoting Yogi Berra).

    Having said that, for Nortel to survive some very drastic and immediate changes need to be made by current management, which has shown a great deal of stubbornness, if not denial, with respect to its motus operendi to date. In other words, they need to learn what they don’t know (and quickly)….–bb

  • broadbandbill

    'Joint SOA initiatives'?

    TIC — surely you jest and not really trying to insult IBM. Who exactly at Nortel knows what SOA even stands for. Please, name names; I dare you…–bb

  • duncan_stewart

    Gotta weigh in on the issue of “fair and balanced.” I never went to journalism school — but my mum and sister did, and I have been writing a tech column for the Post for 9 years now.

    One of the things that they teach you about being a good reporter is that there is no such thing as “100% objective unbiased journalism.” We ALL have biases, some of which we are aware of and some of which we aren't (subconscious, cultural, etc.)

    A good reporter (or blog host) tries to do the best they can to show all relevant facts and tries to be even handed. And we all fail — it isn't possible to set aside biases we don't even know we have!!!

    But what the best kind of observer does is to clearly flag what is reported fact and what is the writer's opinion. I think if you look at Mark's “crystal ball” post is it pretty clear that it is 100% opinion.

    I have found mark's disclosure of his conflicts and biases on this blog generally up to the highest standards.

    Happy New Year to all!

  • TongueInCheek

    bb – you're ex-Nortel right, so you would know names more than most here. I don't know who leads Nortel's Healthcare Solutions that was part of an award given by IBM to Nortel for SOA work:

    “The IBM IMPACT Innovation Award recognizes Nortel for its key IBM SOA foundation resource, the Nortel Agile Communications Environment, which leverages SOA frameworks and Web Service standards to simply and rapidly deliver communications-enabled applications and business process. The Nortel Agile Communication Environment's use of open standards also enables businesses to quickly and easily increase revenue opportunities and productivity, while lowering capital and operating costs.

    Nortel has tightly integrated its Agile Communication Environment with the IBM WebSphere Application Server and is the only communication vendor certified on the IBM Healthcare Integrated Framework. The company is currently working with the Mobile Emergency Triage Research Group at the University of Ottawa on an effort to combine clinical decision support systems and Web services through the Agile Communication Environment Sandbox in an attempt to enhance work flow and overall patient care.”

    Link: http://www-03.ibm.com/press/us/en/pressrelease/…

  • Texan2

    BB,

    Not denying that current management has had its priorities on the wrong things – instead of focussing on growing or maintaining the top line, they focussed too much on 4.8 hour responsiveness and Sixteen Sigma (if you know what I mean). Kinda sad to see the management worry about green, blue, brown and black belts by hundreds when they should have gone back to the basics – listen to the customer and take lead from their wants and needs rather than assume 4.8 hour resonsiveness is what they wanted.

    I do believe 2009 is a do or die year for Nortel, but I would give Nortel better odds than Mark.

    That said, my predictions for 2009 :

    MEN is tentatively sold to Huawei for 800M to 1B, only to be blocked by the US and Canadian Government who in turn guarantee 2B in loans instead.
    CDMA is sold to E// for 1B cash + some portion of the current debt load.
    The rest of the carrier/enterprise leaves Nortel with a much smaller revenue base (5B) but probably a cleaner balance sheet.
    MZ, JH take off with their golden parachutes, but would probably be without job for many years to come (did Frank Dunn ever find a new job?).
    Nortel stock recovers to 1.5 by mid 2009 but any additional recovery is going to need overall market conditions/economy to improve.

    Call me an optimist, but it is much easier this way ;-)

  • Pingback: Nortel’s 2009 Prospects | All About Nortel

  • brett5

    Does anyone believe that an Enterprise + Carrier voice combo would be very attractive to Cisco, IBM or Microsoft? I believe that Cisco is in talks with Avaya and Nortel for their Voice app business. Nortel might be more attractive from the standpoint of scalability and further entry points into Carrier solutions vs. Avaya.

  • broadbandbill

    TIC,

    No, I am not ex-Nortel, just a very hard-driving start-up guy that has knows his Telco stuff (for now, just take my word for it).

    Early in John Roese’s tenure I tried to push through an SOA-based telecom software architecture (which Nortel needs very badly) and John had me talk to his ‘experts’ in Ottawa. Smart, bright and very talented but clueless. You see, software architecture is analogous to music composition; just because you have a degree from Julliard it does NOT make you a musician (or a composer for that matter).

    And that is precisely what Nortel has; bunch of great ‘violinists’ that could play Mozart well but what Nortel needs is a Mozart. These guys are out there, if you know what you are looking for.

    And regarding IBM’s Innovation Award, just marketing mumbo-jumbo; no one in the industry respects Nortel’s SOA capabilities; being ‘certified’ by IBM benefits IBM more than Nortel. Nortel needs to develop its own version of ‘Websphere’ or they will be yet another (VoIP) application that is controlled by someone else. Nortel has all the pieces but one: strategic technology direction and architecture. That is the missing link at Nortel…–bb

  • broadbandbill

    T2,

    'Sixteen Sigma'- LOL.

    That's is the problem at Nortel; management are a bunch of mechanics that can't get the vehicle out of P ('park').–bb

  • TongueInCheek

    Thanks for comment BB, I appreciate them. You and I do generally agree with one of your key comments around Software Architecture and needing a leader to drive that innovation. I fundamentally agree that for their future success, that this is a key component they do not have today.

    On SOA, I tend to disagree with your thoughts that Nortel needs to build their own version of “WebSphere” or in other words, their SOA framework engine. I much prefer the relationship with IBM on this over taking the Cisco approach of SONA. I don't believe that Network Layer folks are going to beat out the Application Layer folks driven by the software community as we know it today. It's pretty simple to understand the Why Cisco is doing this, but the proprietary lock-in will limit it's broader success.

  • yes4aapl

    Duncan
    because I love you I will try to post your ideas again
    this one is lost in the blogg move!
    ok
    Two comments — one of which I would have posted earlier but I was on a plane!

    1) Re: the G&M story that Nortel had a solid $1B bid for MEN…and hasn't taken it yet. Ummm…anything is possible. But given the absolute drubbing Nortel has taken in the stock market, the media, and FUD from its competitors over its weak balance sheet, I have to be sceptical. Let me re-phrase that: I unequivocally do not believe that there was a firm billion dollar bid and that NT is delaying. Even if they can get a better bid in 6 months or by playing various bidders off against each other, NT has almost certainly risked billions of dollars of future revenues and market cap by not shoring up their balance sheet and thereby preventing the bankruptcy story from being played out publicly.

    2) If they did get $1B from MEN, they need it internally for eventual debt repayment, pension obligations, restructuring charges, etc. Even though I am sure there are lots of interesting acquistion candidates (and at good prices since the market crash) Nortel doesn't have the luxury of spending any windfalls.

    For Nortel (in the current climate of potential bankruptcy fears) to spend ANY of a hypothetical $1B from MEN on an acquisition would be akin to a drowning man being thrown a lifeline — and using the rope to start making macrame!

    Happy Christmas/best of the season to all.

    Duncan

  • broadbandbill

    TIC,

    I also appreciate your comments; this is where ‘like minds’ have an opportunity to exchange ideas (Thank you Mark).

    My feeling on SOA is pretty simple: you either OWN it or it owns YOU! SONA is Cisco’s effort to be the next services OS and even with its proprietary nature I appreciate their strategic efforts. They know that whoever owns this will own the emerging services delivery model (mashups, et al) for the next two decades and, as such, billions of future revenues.

    In the Telco services market we are exactly where we were two and a half decades ago, which is at the point of CONTROL. (I have mentioned this in my past blogs a number of times). During the early PC-OS wars there were several contenders: MSFT (MS-DOS), IBM (OS/2), Apple (AppleOS), Bell Labs (Unix), SCO (XENIX) and a few not so notable players. I am old enough to remember PICK –OS (with my due respects to Bill Pick, a true OS visionary). Well, we know who won that war.

    Then came the network operating system wars; there was MSFT, again (with its NT), Novell (Netware), DEC (dating myself again) and its DECnet and Apple with its AppleTalk. Yes, Unix/Xenix also tried, once again unsuccessfully. Well, we also know who won that war as well; Billy boy – 2 : RoSW – 0.

    So, here we are; two and a half decades later going through the same battles. MSFT, IBM, CISCO and Oracle/BEA/SAP (all middleware vendors). Forget the middleware mutts, not a chance. So, the real battle is between the networking guys and software/applications vendors. So far, the only real networking vendor is Cisco; they own their domain but are weak on the application side (note: they are doing a great job getting there fast; i.e.: Web-ex, etc.). At the very least Cisco is smart enough to know what it needs. The other two heavies are MSFT and IBM, both SOA-savvy with MSFT being slightly ahead. After all they initiated the concept of ‘web-services’, they also own the desktop NOS space (NT) as well as the applications (forget Sametime/Notes, etc; all proprietary IBM shit). However, IBM does have Websphere; a comprehensive SOA-based framework that is pretty elegant to say the least. SONA is also proprietary but not elegant at all; just another Cisco protocol-centric crap.

    So, how does Nortel play in this world? So far, WRONGLY! They are trying to play in both camps; relationships with both MSFT (VoIP) and IBM (Websphere). What Nortel does not quite understand is that both IBM and MSFT are much smarter than anyone (and I do mean anyone) at Nortel; they will suck up their technology, domain expertise and people to a point where Nortel will have nothing left.

    Nortel has only one path in the SOA space, which is to go at it alone. They have both networking expertise and the key application (VoIP) and that makes them more formidable than they realize. Unfortunately, Mr. Riedel (NTs’ CSO) is a very talented market strategist but not a technology strategist, which makes Nortel a sitting duck. Eh?..–bb

  • Ex_Nortel

    You are dreaming. Cisco is not having discussions with either party. Cisco is very happy with its VoIP business. Unlike Nortel or Avaya – Cisco actually has a product set that produces nice gross margins and profits. Nortel's problems and eventual demise simply mean that Nortel's customer base continues to erode in Cisco's favor and its distribution continue to jump ship (at this point in time to Avaya).

    No one is buying anything from Nortel in this current market environment: (1) Nortel is spinning towards bankruptcy; (2) business has slowed down; and (3) credit is tight; (4) Nortel's assets have decayed over the past 3 years and are not worth a lot; and (5) a 363 sale allows a buyer to truly cherry pick juicy morsels off a desperate seller without dealing with head count, pension, of severance issues.

    Some people on this board are in fantasy land thinking that Cisco, Huawei, and Nokia are going to brain dead and waste $7.5B on Nortel bonds and Nortel's pension liabilities. This is the real world and my friends at Cisco are very happy to watch Nortel's problem become very public and very bad – it is an excellent message to all who might think / risk not buying Cisco. It is always difficult to explain to one's boss how one selected a company who's products are losing market acceptance,who's products are poorly supported, and who is going bankrupt in a very public fashion.

    In the next couple of months, Nortel will become the media's poster boy for bad management and what is wrong with Canada non-resource and non-financial sectors. And every day the floggings will get worse until the Canadian media finds some one else to flog with equal glee. Just think of the field day that the media will have with Manley the minute any possible 'bail out' discussions become public.

    This company goes into bankruptcy in 2009. It will take a lot of luck and the right management to get it restructured and out of bankruptcy.

  • brett5

    Excellent post. This is why it could be believed that Cisco and IBM might be interested in taking out NT because of their large application (VoIP) base in both Carrier and Enterprise spaces.

  • broadbandbill

    brett5,

    Thanks for the supportive comments but I disagree with your assertion regarding IBM and Cisco potential interest in Nortel.

    Cisco won’t due to culture differences (huge) and IBM will get there through industry adoption of Websphere. Nortel, by default, becomes the odd man out…–bb

  • yes4aapl

    1. MENs will not be sold. Nortel will seek insolvency protection instead.
    2. Too late to get new CEO during last days, ultimatum green CEO goes down with the ship in 2009
    3. Won't reallocate more cuts before delisting and bankruptcy
    4. Delisted on all exchanges same day with pre-announced last trading date
    5. dunno what Bo will do… =)
    ===========
    re
    so many good predictions under that article but Proto was the best.

    Let's see if point nr 4 from Ex_Nortel will be true

    4. The bond holders do not approve of the final reorg proposal and Nortel is eventually cut into pieces and sold off. A small rump company emerges out of bankruptcy with the rights to Nortel's name and some of its businesses.

    MEN is the open book yet and Proto was right about that.
    There was no buyer for MEN and NT had to use Ch11 in Jan.
    after Ch11 there should be new price on Nortel's assets.
    Who wants MEN now without the debt and pension deficit?

  • scalpcutter

    My rebuttal to Mark.
    1/ Won't happen. Huaweii were already refused. U.S security.
    2/ That's possible.
    3/ Agreed. I would expect alot more cuts.
    4/ Very possible.
    5/ Ha.

  • yes4aapl

    7. It gets revealed that Mark Evans and Yes4appl are actually the same person as this is the primary driver for negativity and false statements which brings increased traffic and increased revenues for the site from the ads.
    TongueInCheek
    ===========
    Re
    I love that prediction
    TongueInCheek predicts that me and Mark Evans /ME/ is the same person.
    To answer that I would guess Mark Evans would have All About Apple blog!
    What do you think about that Mark Evans?

  • yes4aapl

    And that is precisely what Nortel has; bunch of great ‘violinists’ that could play Mozart well but what Nortel needs is a Mozart. These guys are out there, if you know what you are looking for.
    ====
    re
    Let me continue to dig the old posts
    Why?
    Because the past explains the future?
    I remember reading all broadbandbill/s posts with exitement.
    but when I go back and read his posts again, I have nothing less but admiration for that poster.
    Thank you BB for sharing you thoughts with all of us.
    http://disqus.com/people/broadbandbill/#main
    I am so grateful that you did not stop posting at 100 level…
    as bashers of Nortel's critics suggested…
    yes4

  • broadbandbill

    yes4aapl,

    Thank you and it has been fun but at this stage there is very little we can say/add that hasn't been said before. It's over, iime for all of us to say goodbye.. –bb

  • hamiltok

    Hello All,

    How do you think Nortel's stock will hold for the next few months? Currently, its stable at 23Cents a share.

    I recently bought 16000 of their shares. Was it a good idea or bad? I'm just in it to make a quick buck.

    Thanks

  • hamiltok

    Hello All,

    How do you think Nortel's stock will hold for the next few months? Currently, its stable at 23Cents a share.

    I recently bought 16000 of their shares. Was it a good idea or bad? I'm just in it to make a quick buck.

    Thanks

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