Is Cisco Interested in Nortel?

By Mark Evans | Published: February 10, 2009

Cisco has more than $30-billion in cash and a hunger for acquisitions so could Nortel or parts of Nortel be on John Chambers’ shopping list?

The short answer is probably “No” given Cisco appears to be really focused on the consumer market these days. There are suggestions it may be interested in acquiring Skype from eBay.

Are there any parts of Nortel that Cisco would want to buy?

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netas

i dont know. but i wanted to share an article that i read last week. it's about Canadian politicians being against Nortel taken over by an American firm. so
no Chinese, no American who else left?

the link is below.

Canadian Politics Would Kill Any Potential Sale of Nortel to U.S. Firms
http://businessvoip.tmcnet.com/topics/applicati…
LonelyOpsGuy

Garage sale of assets, yeah….

But the fundamental question is: why would Cisco do it? In which areas Nortel is currently strong that could trigger a glimpse of interest to improve or complement Cisco's portfolio of products and services?

Also, even if there was interest. Would Captain Z. and his troops know exactly 'what' to sell, given the internal mess? Hey! Just don't announce it yet to the employees. Otherwise everybody would jump ship to the part that will be sold and eventually, capsize it. Just like what happened with MEN some months ago……..
horace_grimswold

I'm sure the No-tel fat Six Sigma black belt-ers would be willing to negotiate a cost-plus sale. How's that add up?…. negative 6.5 billion in liabilities, plus 2.5 billion in cash, umm, say 5% profit, let's do the math…Nortel paying Cisco $4.2 billion to be “bought.” That sounds like a fair trade.
brett5

Probably not interested unless they were able to get pieces for 'cheap', in my opinion.

However, Cisco lacks true optical capabilities and just lost a deal to Juniper for AT&T resale service whereby a true optical product might have kept Juniper out.
SumDumGuy

Maybe it is more likely to be someone like Gores Group making a play for the Enterprise assets. Nortel doesn't have anything that Cisco would want or need. It is better for Cisco to let Nortel suffer. It helps Cisco pick off the customers and channel partners without having to shell out money for anything.

Lets say Gores goes for Enterprise, then Nortel MEN and Carrier stay Canadian and avoid the Canadian political issues.

Gores recently hired one of the dismissed C-level executives as an adviser according to LinkedIn so that might be a sign of things to come.
Teleguy

Cisco is so far behind in many areas of the networking and optical components, that they wouldn't know what to do with a good portion of Nortel. They may be interested in some of Enterprise, but I think that will remain as the core of the new Nortel.
OneOfTheFewLeft

Honestly, given the relationship between the two companies. If you were Cisco would you be looking to buy part/all of Nortel, or would it be more enjoyable to watch the company struggle to it's last dieing day?
less

What Would Nortel Do if it were in Cisco's position today? Morever, what does Nortel expect Cisco to do?

Over the last few, Nortel has been acting more like the average upper-class arm candy of the alpha male than the alpha male itself: Have money, will shop.

Bored? Go shopping. Happy? Hit the mall. Depressed? Buy a new bedroom. Lonely? How much is that doggie. Met a friend (that makes you look good)? Simple. Dump the dog at the dog-sitters for a grooming and pedicure, and take 'em to lunch in yer limo filled with sports memorabalia bought at auction for hubby (alpha male) number 3's upcoming birthday. Its the thought that counts.

As for your enemies (real or perceived), if you can't beat 'em…. you snipe about how they waste money, hope their boobs sag and their Botox treatments show, pray their cashcows finally get pinched for cheating on taxes and breaking laws.

In short, it would really boost certain egos if their competitors got greedy and lost money doing so, supporting their rationalization of personal failures as “Its the economy, stupid.”
exnt2

not really. except for optical and wireless. optical is getting crowded too. wireless from nortel is in a tailspin. cisco would only buy top 3 product lines and both these segments are not there yet.

cisco culture is also very different from nortel. at least half the nortel managers, useless powerpoint architects and product managers would get booted out in no time.

right now cash is king. cisco will keep it as there are a lot more attractive acquisitons to be made.
brett5

Maybe so, but if you could pick up Nortel's Ethernet biz – to immediately end-of-life & flip to your technology and also pick up optical for less than $2B that might be very attractive for Cisco who would still have $29 Billion in the bank after the transaction.
broadbandbill

Not a chance! MEN was the only option and they obviously passed.

Cisco is very focused on the consumer (via web/entertainment), have been making lots of noise down here in Hollywood with their EOS (Entertainment Operating System – what a scam) and will NOT want to poison themselves with a ‘sick puppy’ (per Happily Retired Cisco Exec). Nortel has nothing that Cisco would want…–bb
CrazyCasey

With all the great experience the Six Sigma people has gained during the last couple of rain-making years for Nortel Executives, the team is now ready for their next engagement.

If you are an Executive looking for that perfect GOLDEN parachute, you must talk to us! It does not matter the state of your company. We can help you scam your employees and suppliers so that you can have that golden exit. Pension deficit? No worry. Private Jet? We can help you maintain the luxuries you so deserve, right till the very end.

And oh, worry about what to do after the exits? DON'T! We have a loyal network of ex-GE executives and PerfectScam alumni who are actively looking for high power scammer like you for their next gig.

If interested, contact us at PerfectScam dot com. You won't be disappointed.
Ex_Nortel

I always find it amusing when people at a bankrupt company with collapsed market shares some how believe that their products and services are leading edge and have extreme value. Nortel is not a technology leader – it is barely a technology follower. Its Ethernet and Routing products are a joke – and their lack of market share demonstrates that fact. Nortel is losing Voice over IP market share and its product distributors are jumping of have jumped ship, and recent market share numbers demonstrate this sad fact. The numbers after the bankruptcy announcement will be even worse. Nortel is a non-player in the GSM / UMTS market – it simply loses money and market share in a very perverse manner as it wastes valuable R&D dollars.

Cisco, Nokia, Juniper, Huawei, and Ericcson have the market share, products, distribution capabilities, and the R&D funding. Nortel has nothing but a declining CDMA business and a money losing fiber optical transport business that will end up being dismembered and sold off piecemeal in a series of liquidation sales.

All Cisco, Juniper, Huawei, Nokia, and Erriccson want from Nortel is for Nortel to liquidate itself. They don't want to pay for anything from Nortel. Whatever Nortel customer base remains after Nortel dissappears will fall into their laps anyway.

At the end of the day, the market has voted on Nortel's products – and they have voted to buy someone else's products. When Nortel releases Q4'08 and Q1'09 numbers, all the day dream believers at AAN will realize just how bad Nortel's situation is – and just how valueless the networking business views Nortel. The reality is that most of Nortel's products have poor functionality, poor performance, and poor quality.

As someone how knows John and others quite well, I can state that no one at Cisco has any interest in anything at Nortel other than using Nortel as a punch line for internal jokes at e-staff meetings.
protosphere

Cisco didn't want even a part of them years ago, let alone now.

Cisco and Nortel use to spit at each other behind closed doors years ago, More recently we witnessed their Cisco Tax campaign. The last person that came from from Cisco was ethical Gary Daichendt who left abruptly only to get slandered for it. The culture clash and something good buying buying something bad just doesn't make sense on this macro level.

During a Report on Business interview years ago when Nortel was in an exponentially better position, Cisco's John Chambers avoided the question if he wanted any part of them repeatedly until pressed into the ultimate answer of no. He said he did not know how to do large acquisitions while politely complimenting their engineers. . Yet, Cisco went on to buy Scientific Atlanta successfully thereafter as a stark contrast to Nortel's Murphy's Law acquisitions like PEC or Tasman.

The only area Cisco may have wanted in speculation was Nortel's customer base to sell their own products into but now with bankruptcy they can acquire this on a platter for free through simple attrition as so many others are doing.

The Cisco buy out rumor has surfaced many times, along with their last dance partner Motorola, even Siemens, and they already sold what they could to Alcatel (UMTS) unable to sell MENs now.

Never mind Cisco, is there anyone who wants any part of Nortel? Even if there was, why pay for something they are increasingly getting for free with their customer exodus and outlook of the Nortel brand disappearing altogether.

Cisco? Not a chance. I am sure there are other by far more likely contenders at this point that don't want any part of them either, or are at least willing to pay a red cent for something will get for free in the not too distant future =)
Casual_Observer

LOL. Mark is getting desperate to generate traffic on his blog. How many times have we seen this topic ?

By the way, given that the banking system in the United States is insolvent, I'd say Cisco or anyone else showing a cash balance on the balance sheet is just a number on a piece of paper. It really doesn't mean much at this point because banks have tied up or spent all the cash on other opaque investments which are nearly worthless.
exnt2

what are you smoking. nortel ethernet biz is less than 3% market share. why would I buy the whole product line and deal with all the crap of end of life, when its going to disappear anyways or when I can rip out equipment and swap in my gear.

optical less than $2B. again what are you smoking. its valued at $1B if you are lucky. most of MEN is obsolete except for 40G and 100G, the rest is legacy LOSING share. Again its easier to just rip out gear and swap in at a discount rather than dealing with discontinuing products, laying off useless good for nothing people sitting around, figuring out who the good ones are to retain yadda yadda.

there are many optical players who can be bought for less who have as good a story which Cisco is good at marketing.
exnt2

—–
Teleguy commented Cisco is so far behind in many areas of the networking and optical components, that they wouldn't know what to do with a good portion of Nortel. They may be interested in some of Enterprise, but I think that will remain as the core of the new Nortel.
—–
if nortel execs have one quality its making the kool-aid that these people are still drinking giving them dreams which about to be ruthlessly shattered into minute little pieces. OR its just the heady arrogance that plagues nortel who think they still make the best technology when all they have is old rusted junk it crap.

they could probably raise a lot of cash recycling all that metal from their labs, inventory and taking their equipment out from all their customers.
exnt2

——-
another one from brett5
Cisco is so far behind in many areas of the networking and optical components, that they wouldn't know what to do with a good portion of Nortel. They may be interested in some of Enterprise, but I think that will remain as the core of the new Nortel.
——–
hopefully you are not in the cabinet or an exec or six sigma or own it or yes or leadership edge or a consultant.

what are you smoking. nortel ethernet biz is less than 3% market share. why would I buy the whole product line and deal with all the crap of end of life, when its going to disappear anyways or when I can rip out equipment and swap in my gear.

optical less than $2B. again what are you smoking. its valued at $1B if you are lucky. most of MEN is obsolete except for 40G and 100G, the rest is legacy LOSING share. Again its easier to just rip out gear and swap in at a discount rather than dealing with discontinuing products, laying off useless good for nothing people sitting around, figuring out who the good ones are to retain yadda yadda.

there are many optical players who can be bought for less who have as good a story which Cisco is good at marketing.

are my thoughts about to be put in a fancy powerpoint chart?
less

How many times have we seen this topic ?

Kinda hard to count, exactly, what with all the evergreen “global warming” “secular bear” LOL, and Godwin's Law “spewed” across the Internet.
Casual_Observer

Why is a company with supposedly $30B in cash selling bonds ? That should tell you more about the banking system's insolvency than anything else.
headabovewater

I heard from ex-NT guys that are now working for telcos that NT products are actually not that bad. In fact in some cases they are a bit disappointed that our stuff is being ripped out for Huawei, who's products apparently suck but are so cheap they can't be ignored.
Dataguy

The one thing that would be worth any money is some of the patents. and they don't come with people or unpaid retirement plans.
Got_Out

I would offer that no one is likely to buy anything until the major issues (Pension Liability, Cost Structure, etc) are resolved. You could buy the whole company on the TSE for $50M, but it comes with a huge set of liabilities.

Why would Cisco buy Enterprise – not for the products, not for the patents, not for the people. They'd buy it for the installed base and relationship. Would make them the undisputed king of voice (Digital and IP) and Telephony apps. Would link their network story and vision with that base. And of course would be more fuel for the Cisco Sales/Marketing machine.

In the Carrier side, its would be similar. While they could make use of the core platforms, they would eventually integrate. The declining legacey products would be of less interest to them and customers (eg Verizon) are already moving to others.

Optical has some attraction, but if they really wanted it they would have gone already ?

Cisco is very mindful of integrating large companies and managing the culture impacts. Dont see them wanting it all. Would certainly be a management bloodbath on the Nortel side within a year.
less

Forget Cisco. Forget AGM. Break out the swagger.

http://www.von.com/news/nortel-might-win-verizo…

VeriZon is begging to work with Nortel after Hackney laid it out and bitch-slapped 'em with an offer they can't refuse. The press has sugar-coated it thusly:

02/11/2009
With plans to be commercial with a WiMAX-smacking 4G wireless broadband LTE network by the end of the year, Verizon Wireless had better get on the stick and announce some vendors, right? That’s exactly what it plans to do next week at Mobile World Congress in Barcelona, and it looks like struggling Nortel Networks might be one of the lucky recipients of the lucrative contract.

No word on exactly how lucrative that contract will be, but considering it represents a nationwide overbuild, it’s at the very least a welcome carrier capex opportunity to hungry telecom vendors. And perhaps there’s none hungrier at the moment than bankrupt Nortel.

VeriZon shoud feel lucky Nortel found WiMax too piddly to mess with, otherwise they'd be on the way to Ch 11.

For its part, Verizon has taken a page from “American Idol,” making those that made the cut sweat for a while. The vendors that have been selected do not themselves know what Verizon has decided, so it’s a good bet that executive vice president and CTO Richard Lynch's keynote and selection announcement at MWC will be well attended.

VeriZon needs to be extremely careful how Nortel defines Long Term Evolution. VeriZon wants it up and running by year's end, but even “short term” a la Mike Z typically means 4+ years and a few billion.
27539

“we want to be like Cisco”

“we want to be bought by Cisco”

sigh …
Teleguy

Cisco wouldn't know what to do with Carrier – they are strictly Enterprise. Same goes with Optical. They would not be interested because they do not have the ability to capitalize on the MEN market the way teleco companies have. It would be hugely stupid of Nortel to sell MEN to Cisco and I hope they have more sense than that. MEN needs to go to a company who deeply understands the Optical marketplace and opportunities. That is definitely not Cisco.
Got_Out

Be careful not to be too narrow in the view of Cisco. The have a fairly significant Service Provider business and can be found in most of the major carriers. Core Routers, Edge Products, Wireless (not legacy), Optical Core, WDM, Optical Edge, etc. Their acquisition of Scientific America cabletop business was a big step both in terms of size of acq and the nature of the business. What they dont have is the same VOICE penetration. In addition, they tie their Enterprise business in with Carrier Products as well. Ask any Nortel Carrier Sales person.

If they wanted to expand their presence, Nortel's Carrier business would make some sense. Cisco doesnt have a 2K type product or carrier scale multimedia. Their focus on Telepresence might lead them to wanting something with the scale of MCS.

They are focused on where the SP market is headed, not where its been. Sadly, the Nortel business is the reverse. The strength of Nortel's current business is a rapidly decling business (CDMA) and a VoIP business that was built on evolving DMS based customers. The barriers to competitive entry are gone. Nortel Carrier has been to slow responding to the new world, the changing SP needs and the competition. Cisco would want several of the platforms and the relationships/installed base but not much else.

Given the “fire sale” situation, the investment would probably be relatively small for them, assuming the liabilities (pension liability, excess people, etc) has been cleared up before final acquisition.
yes4aapl

Cisco Reports Third Quarter Earnings
Q3 Net Sales: $8.2 billion (decrease of 17% year over year)
Q3 Net Income: $1.3 billion GAAP; $1.8 billion non-GAAP
Q3 Earnings per Share: $0.23 GAAP (decrease of 21% year over year); $0.30 non-GAAP (decrease of 21% year over year)
Q3 Cash Flows from Operations: $2.0 billion
Total Cash, Cash Equivalents and Investments: $33.6 billion
SAN JOSE, Calif. – May 6, 2009 – Cisco® (NASDAQ:CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 25, 2009. Cisco reported third quarter net sales of $8.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.3 billion or $0.23 per share, and non-GAAP net income of $1.8 billion or $0.30 per share.
———-
Good companies are doing just well, bad companies will exit markets.
btw
The vast majority of Cisco’s $33 billion in cash — about $26 billion — remains overseas. That limits Cisco’s flexibility
yes4aapl

Cisco Reports Third Quarter Earnings
Q3 Net Sales: $8.2 billion (decrease of 17% year over year)
Q3 Net Income: $1.3 billion GAAP; $1.8 billion non-GAAP
Q3 Earnings per Share: $0.23 GAAP (decrease of 21% year over year); $0.30 non-GAAP (decrease of 21% year over year)
Q3 Cash Flows from Operations: $2.0 billion
Total Cash, Cash Equivalents and Investments: $33.6 billion
SAN JOSE, Calif. – May 6, 2009 – Cisco® (NASDAQ:CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 25, 2009. Cisco reported third quarter net sales of $8.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.3 billion or $0.23 per share, and non-GAAP net income of $1.8 billion or $0.30 per share.
———-
Good companies are doing just well, bad companies will exit markets.
btw
The vast majority of Cisco’s $33 billion in cash — about $26 billion — remains overseas. That limits Cisco’s flexibility

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