What Could Have Been: Nortel-Huawei JV

By Mark Evans | Published: January 25, 2009

If you look back over the past decade, Nortel has made a series of strategic mistakes – ranging from multi-billion dollar acquisitions that bombed to asset sales that failed to materialize at the right time to questionable CEO hirings.

On the list of what could have been is a proposed joint venture between Nortel and Huawei in early-2005 that would have seen the JV develop a router portfolio to take on Cisco. It was going to be a Canadian router price at 30% below Cisco with comparable features and performance.

Unfortunately, the proposed JV disintegrated after the two Garys – Gary Daichendt and Gary Kunis – resigned. Nortel walked away from the deal, which was expected to generate $1.1-billion of new sales for Nortel over the first 12 months.

Here’s the complete PowerPoint presentation: nortel-huawei-jv1

Nortel-Huawei

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  • broadbandbill

    “The enemy of my enemy is my friend” is NOT a Chinese proverb (it’s an Arabic one). The two Garys knew that you don’t sleep with the enemy even if they appear to be your friend; they had looked underneath the covers.

    Chinese manufactures are only interested in one thing: eliminating competition, one dumb and naïve company at the time. That is how both Stalin and Sadam became powerful, by eliminating their competitors one at a time. They are cleaver, cunning and ruthless, and the Garys knew that…–bb

  • RamblingFish

    bb – I'm not certain I understand what you're driving at with your comment. It's relatively well understood that Kunis was the driving force behind the JV that Mark references. Had Owens and the BoD not screwed the two Garys, the JV would have happened.
    If you're theorising that the JV would have been a death-knell for Nortel – maybe, but it would have been a blaze of glory, as opposed to the whimper we're witnessing now.

  • scalpcutter

    Wrong Fish.
    BB is right on this one.

  • scalpcutter

    Huaweii are not going to get their foot in North America so long as the American FBI, NSA and homeland security run the show.
    Apparently Huaweii were willing to pay alot for MEN.
    The deal was quashed for security reasons.
    If Huaweii would let the americans monitor everything they do in N.A they would have bought up alot of companies over here so far.
    The chinese are not going to let that happen and Uncle Sam will not budge.

  • Many

    Cisco already had a JV with Huawei, they just did not know it until the found out Huawei had cloned thieir IOS and EIGRPsoftware (right down to the inane cisco comments in the code :) .
    http://newsroom.cisco.com/dlls/corp_012303.html

    Unfortunately the JV fell apart when Cisco wanted money. AFAIK 3COM is still playing ball:
    http://www.networkworld.com/edge/news/2004/0728…

  • less

    Local Huawei currently doessn't seem to have many job offerings former Nortellians – Yanks – could fill.

  • scalpcutter

    What is “local” huaweii to you?
    Yea..there aren't many espionage, cloning or patent stealing jobs former Nortellians or Yanks are eager to fill.

  • broadbandbill

    Score one for centralized control; applied to exceptions it actually works..–bb

  • broadbandbill

    A blaze of glory for Huawei, not Nortel…–bb

  • horace_grimswold

    To rekindle days yonder that could have been, don't forget that Billy Owens kicked the tires about a Cisco partnership in 2004, but his indecisiveness put the kibosh on anything ever happening on that front.

    http://www.marketwatch.com/News/Story/Story.asp…

    I sure do miss the days of $4.44 Nortel stock. (Pre-split of course).

  • broadbandbill

    NORTEL, HUAWEI TO ESTABLISH JOINT VENTURE TO ADDRESS BROADBAND ACCESS MARKET

    PLAN TO JOINTLY DEVELOP ULTRA BROADBAND PRODUCTS FOR DELIVERY OF CONVERGED SERVICES

    FEBRUARY 01, 2006

    http://www2.nortel.com/go/news_detail.jsp?cat_i…
    ————————————————————————————————————-
    The above was yet another (extremely naïve) attempt by the then-new CEO (Zafirovski) to establish a JV w/Huawei. It was (very astutely and rightfully) killed by George Riedel shortly after his arrival.

    That’s the difference between a good strategist and a naïve one; the good ones always know who the enemy is…–bb

  • broadbandbill

    What do you mean 'this one' :) . Tnx–bb

  • protosphere

    I always wondered how could they partner with Huawei after setting the specs against them in the BSNL deal, restricting BSNL to accept tenders from companies with a minimun 10 years international experience and locking out competitors like Huawei and ZTE.

    (This not only resulted in losing money but Nortel's faulty gear was later replaced with Ericsson's. Nortel blamed their local supply chains for all the good this 10+ years international experience did them. )

    I would think this exclusion alone would have alienated Huawei from ever partnering with them. Nortel shot themselves in the foot trying to “get foot in India's door” (we termed before they did) (initially unannounced fearing false and misleading press release lawsuits) , and yet again shutting out younger Huawei in the bid to later expect them to want to partner with them.

    Strikes me as they also shot themselves in the foot with Motorola too who many called their last potential “dance partner” in this merging smaller telecom market with greater competition. After all, their very CEO defrauded MOT agreement on several written occasions so how could they possibly save face to claim they wanted to partner with them after this, even if MOT was doing better and there were any logistics to it.

    Like what is it with these guys?Did they expect all sins forgiven?!
    Did they think that was the way, beyonf boundaries, to do whatever they want, shamelessly neglecting their past actions with these companies?!

    I often questioned whether big business operates beyond the realm of the most obvious to harlet the past for cash or whether trust and honesty play any role anymore.

    Did they even care at the time amid endless blunders shooting themselves in the foot and drilling themselves a new orifice any which way they turned?

    As for Cisco, I believe their Cisco Tax campaign as much as I do their downplaying folding they knew about months earlier, or their downplayed restating a restated restatement that doubled estimates and worse every time counted by the week with no further mention of 2003 fraud year as they moved numbers in to Q406, to make 2006 numbers, they still defer revenues, as SEC finally monitors repair after so many years, to them folding today…it is so endless… Who trusted them or their numbers to partner with anyways?

    I don't think even LG JV furnished any substantial returns. Come to think of it nothing worked from PEC, to endless other aspirations like Neptune, PEC, WiMax, BT, LTE after selling UMTS, gone cash cow CDMA today, etc… Any revenues they bought to look big they paid for dearly. Just what were they doing?

    I do not think growing companies like Huawei or Cisco or MOT, etc,. would take these pathalogical contradicting optimists seriously after biting them in desperation and with all sins forgiven to neglect the past.

  • protosphere

    in the absence of a bankruptcy judge, they were low balling the bids.

    Where do you find Huawei's bid that runs contrary to your claim that authorities would block a buyout anyways. Furthermore, Huawei had no comment to confirm any interest in MENs.

    Pondering to assess bids at twice the anticipated value like downplaying folding they knew of in advance were nasty and desperate maneuvers of late like Cisco Tax, etc…

    I said they would not sell MENs early swimming against the tide, and maintain they won't sell anything post bankruptcy with a catalyzing decline of customers and suppliers, again swimming against the tide.

  • RamblingFish

    Meh… The great thing about opining what may have been is, there's no right or wrong. It's merely opinions.

  • scalpcutter

    If you would talk to nortel employees as I have you would know that they have been told this unofficially ala the rumour mill. Huaweii wanted MEN but the deal was not allowed to happen due primarily to American security concerns. Rightfully so.
    You may never hear this officially but people in the know have been told.
    It is common knowledge internally.
    Nortel has a huge installed base and Huaweii would simply use the acquisition of more technology to further their agenda which as I say the FBI, NSA, CIA and homeland security are very aware of.
    Do you think Huaweii will ever admit they bidded on MEN?
    Hell No.
    We are talking the chinese here. Masters of deception and copying.
    The fact Nortel is under bankruptcy protection offers no certainty for anyone of any kind. Absolutely nothing is certain. The creditors decide the fate of the company. They decide if they want Nortel to sell or keep certain lines of businesses. They decide how quickly it is to be done. They can let the whole thing rot if they choose providing the courts don't object, and why should they. The courts are happy to drag things so the lawyers can continue to make money. Wake up People!!
    They can make either the right or wrong decision. It is there decision to make under the watchful eye of the courts. How those questions are answered is how Nortel management then decides who they will lay off. Right now nobody has any idea. The proper way to handle this would have been to allow the creditors to decide who gets laid off. All they are doing is rubber stamping or rejecting whatever Nortel Management gives them. So in essence you are putting your faith in nortel management to somehow save the company and jobs. At the mercy of Nortel Management. Wow, talk about a bad predictament to be in. As you know saving jobs is not their priority. Saving the company name is. Creditors could care less about particular revenue streams, lines of business, potential etc. All they care about is getting their money back in some shape or form. Do you really think creditors have any faith investing in Nortel LOB for the future? Nope, not in this climate. They want their money back. Thing is you never really get your money back when somebody declares bankruptcy protection. You get pennies on the dollar. So the big question is how many pennies will the creditor be satisfied with? I can tell you now, they won't get much. Never do when someone declares bankruptcy protection. The real ironic thing about all this is the following. In the world wide recession climate where bailouts and stimulus debt packages are the buzzword it is GOOD to be a creditor if you are a big bank, business or company. It sucks to be the average joe standing in line behind them but it is good to be a big creditor. Why? Here's why? That institution can cut back (layoff within etc) and default on their own company debt/loans to people saying this in Court “Sorry your honour Nortel owe us billons and we can't sustain our normal operations and duties unitl this is settled”. Of course everything is in the hands of the courts so in effect the big creditors get a reprieve. The little guy goes on unemployment insurace, welfare or a drinking binge. The lawyers get rich.
    Welcome to Capitalism.

  • less

    Darras Huawei no hirie much round-eye.

    Through working at Nortel I've come to understand that what (jealously scheming, therefore paranoid) Yanks call “espionage, cloning or patent stealing jobs” are merely “cultural misunderstandings” based on Yanks' reluctance to embrace the global cultural exchange beyond their borders.

    Twas Yank Mike Z ruined ancient Nortel within three years because he doesn't know from culture.

  • broadbandbill

    Can you blame us? Every time we embrace you, we lose something…–bb

  • broadbandbill

    Spot on! It is well documented in “The Rise Disaster Capitalism”–bb

    http://www.amazon.com/Shock-Doctrine-Rise-Disas…

  • less

    I could say that about every date I've ever been on

  • broadbandbill

    Simple: don't date…–bb

  • broadbandbill

    some more insighful than others…–bb

  • less

    I always thought GM was protected by the prole-elected unions. The proles earned decent money and bought foreign, what went wrong there? Proles too lazy doing overtime to protest the corporate jets? How could any prole do OT much less accept the bailout from others who needed it more? “Assist yourself, then assist others” is it?

    In China, the communist elite will impose these changes on the masses while ensuring that they will profit handsomely from the economic and social upheaval.

    Myth: Real-life Communism is a pyramid scheme.

    Our government wanted the Germans to be able to build up their own industry and wealth.

    Untrue. They (i.e. Zion) wanted to enslave the Euro masses, goad them and the USSR into WW3, sit back and grab the spoils afterward.

    Unemployed and starving Iraqis watched how American contractors brought in cheap Asian labor to rebuild their country.

    There were many Asians at Nortel when I was there. It was a cultural and intellectual exchange. And the most qualified reaped the rewards.

    no one votes for the shock doctrine of disaster capitalism

    …just as noone votes for the benefit of all mankind.

  • RamblingFish

    Indeed. Some are…

  • less

    What say the women to that?

  • broadbandbill

    So we agree on a few things. It is NOT the Asians I object to; rather, it is the Asians in power that I know do not have our best interest in mind. Then again, that just about describes anyone in power…–bb

  • Many

    Please?

  • less

    That just about describes anyone I've ever met.

    And whenever I say that in public the scorned feel compelled scour my race, gender, religious affilation, polital beliefs, nationality, even physical appearance for evidence as to why I am so absolutely wrong and they come away feeling noble.
    People are vain, as all is vanity,

  • broadbandbill

    Soul-less people are vain…–bb

  • The psychiatrist

    less,

    that is beautiful,I would have never thought that someone on thisblog would have the ability to know such an accurate fact on as you say about…most people you've ever met.

    Don't take it personally,it's enbedded in our DNA-the only “love” “caring” and “affection” that exists is usually reserved for immediate family or ones that are perceived as having tangible value to offer

    Even friends are nothing more than a subconscience agreement between two people or more to enjoy a beneficial exchange with each other.,the key being that there must be a beneficial exchange to be had.

    In observing people in the dating scene,the most common request from those looking for a companion is that they are usually looking for someone with no baggage which is virtually impossible,because as humans we always reflect our past experiences (baggage) in our everyday behaviours,such as attitude,preferences,likes ,dislikes etc…,so what potential dating candidates are really saying is that “please don't bring me down with your negative experiences”,which are viewed as not having any benefit in a friendship or heterosexual relationship,hence the request of looking for someone with “no baggage”.

  • less

    Our everyday surroundings offer any number of opportunities to express and satisfy one's vanity.
    To paraphrase Hannibal Lecter: we covet, and constantly accept or decline virtually everything we perceive. And we offer ourselves and others “reasons” for doing so usually hoping to score some points.

  • broadbandbill

    Dude–like my eleven year old nephew says: 'Whatever'…–bb

  • less

    Liek Mike Z says: Right back atcha.

  • exnt2

    good thing they walked away. huawei has crappy software, useless tech support, copied products and a very shady way of doing business.

  • felixmk

    Don't forget Huawei's $17B in revenue and 30% growth rate – another black mark! ;-)

  • Cataractus

    This proposed venture brings down my respect for the 2 Gary's by at least a notch.

    The proposal relies on a fundamentally sleazy proposition: to trick people into buying “Canadian” product when in fact Nortel is simply reselling Huawei product. U.S. and Candian goverment purchasers would have caught on to this instantly, damaging Nortel's overall ability to do ANY government business. And like the misfired Microsoft alliance, it would have left Nortel in the terrible position of promoting a direct competitors product while neglecting its own.

  • less

    Cmon. I'll pay you

    ;p

  • Troller

    Agreed. Makes you wonder yet again about the full story behind the departure of the 2 Garys. Story #1 was crazy Christian Gary D. told the BoD that God wanted him to replace Bill Owens, and the BoD said, “eh, sorry but the Almighty must be present to vote His shares.” Story #2 — which most of us have recently come to believe– was that the Garys' master plan was too radical a departure for the risk-averse BoD, and they were sacked and/or left in disgust. I'm now wondering if Story #3 involves this ethically-questionable move to have Nortel be the Canadian “beard” for the Huawei low-cost router. How stupid did they think their customers were?

  • less

    Like Mike Z says: Right back atcha.

    Placing an uninvolved 11-year-old – “your” 11-eleven-year- old – into the debate to score points is, well, vain, too.

  • Pingback: Link: What Could Have Been: Nortel-Huawei JV | All About Nortel | Nyquist Capital

  • exnt2

    good thing they walked away. huawei has crappy software, useless tech support, copied products and a very shady way of doing business.

  • felixmk

    Don't forget Huawei's $17B in revenue and 30% growth rate – another black mark! ;-)

  • Cataractus

    This proposed venture brings down my respect for the 2 Gary's by at least a notch.

    The proposal relies on a fundamentally sleazy storyline: to trick people into buying “Canadian” product when in fact Nortel is simply reselling Huawei product. U.S. and Candian goverment purchasers would have caught on to this instantly, damaging Nortel's overall ability to do ANY government business. And like the misfired Microsoft alliance, it would have left Nortel in the terrible position of promoting a direct competitor's product while neglecting its own, leaving Nortel with nothing once Huawei sucked every benefit it could out of the JV.

  • less

    Cmon. I'll pay you

    ;p

  • Troller

    Agreed. Makes you wonder yet again about the full story behind the departure of the 2 Garys. Story #1 was crazy Christian Gary D. told the BoD that God wanted him to replace Bill Owens, and the BoD said, “eh, sorry but the Almighty must be present to vote His shares.” Story #2 — which most of us have recently come to believe– was that the Garys' master plan was too radical a departure for the risk-averse BoD, and they were sacked and/or left in disgust. I'm now wondering if Story #3 involves this ethically-questionable move to have Nortel be the Canadian “beard” for the Huawei low-cost router. How stupid did they think their customers were?

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