MEN Reducing Focus on Carrier Ethernet

By Mark Evans | Published: March 2, 2009

The internal e-mails are flying fast and furious at Nortel today. Here’s one from Philippe Morin, who heads up the Metro Ethernet Network business:

MEN team,

I am communicating today some important directional changes we are making to our Metro Ethernet Business. Over the course of the last few days and this morning, Scott McFeely, PLM leader, has been communicating with the Carrier Ethernet team about our decision to reduce our investment in Carrier Ethernet, while still supporting our CE customers.

The overall market for Carrier Ethernet is not growing at anticipated rates and that will only worsen with the global economic downturn. We will continue to invest and increase our focus on maintaining our leadership in Optical. I will share more details behind our decision at my next GIS which will be scheduled shortly.

Even though this is the right business decision, I realize it’s more tough news for employees and will impact the Carrier Ethernet team. But to emerge from our current state, we need to be extremely focused on strengthening the growth areas of our business and strengthening our balance sheets. This is one step in that direction.

Philippe

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exnt2

um so why are they still investing in this metronext product for 2 years which has been stopped for a smaller form factor product. either you are committed to this segment or you are not. kind of ridiculous message to customers. might as well terminate the program, because nobody will by CE from nortel. not that it had more than 3% share anyways.

scalpcutter

they probably will terminate it.
they probably are not investing in it at all.
smoke screen.
keep the natives happy.
tell them what they want to hear until they are told they are done.
the day is young.

exnt2

well they got 100 people writing useless network management functionality for carrier ethernet/ pbt. almost 2 mill down the drain.these people really should be sacked.. morons oops morins.

Hotwheeler1

BT is Nortel's biggest hope for PBT / PLSB..it's now gone..I don't think they have more than 1 or 2 customers deploying or testing this in their network..Most likely to be canned or offshore to China as they are also handling MPLS over there...

exnt2

how much of this market did you have to begin with, Mr. Moron.

nothing much left when you killed off everything but optical. how do you justify a separate business unit and your President position.

Hotwheeler1

Didn't Nortel state 2 years ago that WiMAX and Carrier Ethernet are the future of company ?. They put lots of money into these two programs and now they are on the shelves already... How can anyone on the SLT and especially LOB presidents be the "most effective" ?. Shouldn't someone be fired ? and yet they are still here to collecting bonus...No wonder this company is in the mess they are in now.

I would say replace everyone on the BoD, SLT and bring in new competent people to get us out of this mess instead.

NortelTragedy

Exactly. The BoD and SLT are no more than modern day PIRATES. They've taken the company hostage, demanding KEIP while continuing with empty promises on which they will not deliver.

gone2moro

They did not put "lots of money" into the MERS programs. They put a lot of hype into it.. marketed it more than just about anything else i can remember because it was market disruptive.

But "lots of money" is relative so lets define it. I remember when Philippe recommited to the CE effort and allocated something in the teens of millions for future development including the ESU1800s.

That's not "lots of money". Nortel routinely spent hundreds of millions on programs like Optera Packet Core, MPE9500... developing prototypes that amounted to nothing... so $17M do develop a couple blades for the ERS8600 and a couple edge devices is nothing.

Killing CE and Wimax are merely jestures (pun intended) and won't help or hurt the Nortel bottomless line.......

exnt2

exactly the type of thinking that loses millions of dollars. teens of millions is 'not a lots of money'. wow! whole product lines have been created successfully at startups for less, as they get a lot of work done faster than nortel.

for the record nortel spent 200 million on MPE or neptune. 17 million is nothing .wow. if you have that kind of money to throwaway (and if an exec) then send it my way. I can show you what can be done for 17 million instead of just two edge blades.

Nortel_honey

MPE was the biggest hugest failure from day 1..the people working on that product had an incredible sense of entitlement and attitude, as someone working in the area and on another data program i was shocked at the MPE employees and 1st level management they played to every employee complaint and whine about everything..it got so bad that HR attened meetings as the employees spent all their time complaining....ugh the worst run, managed product at nortel by far!

exnt2

i ignore anyone who was on MPE. not right to generalize but all of them were to blame. too much politics, could not get the architecture right and had to rewrite the code over 4 times. heard it was really crappy. also heard the same thing about CB, WiMax (mpe code), metronext, mers. the list goes on.

RealityStrikes

Is VSE (ATCA) any better? Me thinks not.

Daphne

this is simply more proof of the lack of leadership at Nortel. 3 years into a 3 - 5 year plan, only to find the plan was not really solidified. Now, it's taking months to develop a plan to move through Ch. 11. It seems the only plan is to rape the company of as much money as possible and then get the hell out.

My belief is the only way to recover and exit ch. 11 is to select one single LOB and focus 100% effort and resources into that one LOB. Sell everything else and cut the losses as soon as possible.

Nortel can no longer even pretend to be an "everything" supplier to every customer. That paradigm has shifted. So, come on ELT and SLT - show us that you have some intestinal fortitude. Make a decision, select that one LOB, conduct the firesale and start moving forward. Talking about moving forward for 3 years has done nothing. Take the first step and stop jacking the people around!!!!!

gone2moro

And this is surprising why?...... never invested much to begin with. The PLM leader didn't jump ship because he was happy with the investment and product direction. Ill conceived, poorly funded and based on an antiquated POS the ERS 8600... which is a flipping router to begin with.... where's the cost savings?...... with BT bailing, AT&T banking on Juniper it 's only a matter of time before Verzion figures out the limitations and gets fed up with the platform... suspect this announcement will seal that deal.

A 12 pack of Canadian isn't enought to make this pig look good.

InTheRoundEye

I thougth PBB and PBT was going to rid the world of MPLS... I guess not.

exnt2

it will after Cisco gets into it and decide to replace MPLS.

broadbandbill

It would have if Z hadn't hired a total yoyo as a CTO...---bb

TongueInCheek

More of this kind of stuff should be expected over the coming weeks. Those of us that actually want to see Nortel survive in some form understand that it can not be done while continuing with all of their existing product lines. A much more narrow focus is required, even though it comes with difficult decisions.

Having MEN primarily focused on Optical makes sense given the current market and Nortel expertise. It would also allow for an acquisition of MEN during the Restructuring Phase if appropriate. Acquiring companies don't want or need the burden of reorganization and halting of product families. That job rests squarely with Nortel.

exnt2

yes but this should have happened a few years ago. they just mouthed hot air and now that its deflated they expect everyone to believe market conditions. this clearly outlines how strategic they are and even if the company comes out with a plan, it is still doomed.

and to support this thinking they are getting bonuses. onyl at nortel.

yes4aapl

A much more narrow focus is required, even though it comes with difficult decisions.
=====
re
express yourself
What you expect?

yes4aapl

You hope for selling MEN
That's OK
It's not a crime to hope!
but PBT is gone is it not?
That's what I said 12 months ago.

Casual_Observer

not to be crass, but given market conditions I think it could be this week. We are in crash territory after today's close. Nortel's cash position may very well dry up before the end of the week if the banking crisis doesn't turn around soon.

TongueInCheek

Help me understand how a corporation can lose all their cash in 5 business days when they have hundred of millions available to them? Are you suggesting that the Monitor Report forecasting a 90 day cash burn of around $90 Million is false?

It may be your dream to see them run out of cash this week, but it is highly unlikely even with today's market.

Desk Jockey

I tend to agree with TIC but then again with Nortel, you never know! They said no Ch.11... fooled a lot of people. Now many people believe Ch.7 is the only fate thanks to the self serving interests of upper management!

yes4aapl

TiC is a crook!
I don't know how you can agree with a crook?
A crook is a crook!
TIC is a crook!

TongueInCheek

LMAO you're too funny little man.

scalpcutter

Strongly Agree.

Casual_Observer

The balance sheet just shows accessible money. I'm just saying its unlikely that money will become accessible as things get worse. And things just got worse today.

horace_grimswold

Balance sheet, or is that the fake "dealer invoice" version where the real numbers are hidden elsewhere? And to assume the "accessible" money isn't in the form of ABCP or SIV...Nortel wouldn't be the first company to put illiquid items in the "Short term cash & equivalent assets" column of their balance sheet.

Casual_Observer

Easy. If Citigroup collapses that will cause another wave of panic and freeze up the investment banking and credit systems. Nortel has a very poor credit rating and could be forced into Chapter 7 more quickly if the flight to cash accelerates. The fear out there in the financial community is as worse today than it was last fall. Nortel is still at the mercy of the bondholders. Their fate could determine Nortel's fate in short order.

TongueInCheek

So, are you suggesting that if Citigroup collapses this week that the Mellon Bank of New York is going to skirt Ch 11 rules and immediately force a call on all of Nortel's outstanding bonds, effectively forcing them into Ch. 7?

Casual_Observer

Yes...its certainly possible. Many many rules have been broken already. As I've said multiple times, we need to use Cisco selling bonds to raise cash as a barometer when they supposedly already have $30B in cash. I don't really believe what's on a balance sheet these days since much of the money is locked up in investments somewhere.

scalpcutter

I've got some swamp land you may be interested in.

Casual_Observer

if you can't tell, im not a believer.

TongueInCheek

If that's what you want to believe - then go for it. Nortel's Balance Sheet has been audited and then reviewed by the Monitors. Given this double review and the submissions to the courts, I highly doubt that the cash balances shown are false.

joremero

if the world ends then there's nothing to worry about.....
I agree with TIC, I don't see how Citi's failure will collapse Mellon and then force NT... that's not how it works...

About the Cisco thing, they raised cash because most of their cash is overseas... I read the story online a couple of days ago.

TokyoBoyz

Growth is in the 40G-100G wdm area. So the SONET guys finally got their wish: death to carrier Data - Death to PBT _ Death to PLSB.

Casual_Observer

Yeah..great innovation there at L1/L2 level. 40/100G will soon become a commodity as the leaders acquire assets during this slowdown to setup for the next up cycle. I'd look for Huawei or someone like them to commoditize the L1/L2 optical market soon. As usual Nortel could never figure out that the smarts of the CE market was in the higher layers and not the lower layers.

Casual_Observer

Did they lose the Verizon PBB/MPLS deployment ?

TokyoBoyz

YES

Casual_Observer

my guess is verizon cancelled once Nortel declared chap 11. Same as with the LTE contract.

bankrupt_bob

<<...we need to be extremely focused on strengthening the growth areas of our business ...>>

WHAT growth areas?????

Desk Jockey

Indeed, these GEniuses hate growth. The moment it is noticed it must be cut out, excised and reduced to nothing as part of a Six Sigma cost cutting streamlining project.

One_way_ticket_to_Chapter_7

My thought exactly. Carrier ethernet was growth.

I guess we'll just continue to sell DPN-100 and X.25.

Tally ho for SONET and bring back the FMT-150 and FD-565 !!!