The Real End of Nortel?

By Mark Evans | Published: April 7, 2009

Is this it?

Is the end of Nortel’s long history going to end with a whimper as the company solicits bids for its remaining assets?

What a sad, sad end to Canada’s flagship high-tech company.

The Wall St. Journal is reporting that Nokia Siemesn Networks is looking to buy Nortel’s carrier networks business and Nortel’s R&D operations focused on LTE. Meanwhile, Nortel has apparently put its enterprise business on the block, and attracted bids from Avaya and Siemens Enterprise Communications.

Is this is the best that Nortel’s senior management and board of directors can do?

The company files for bankruptcy protection with more than $2-billion of cash on the balance sheet and launches on a restructuring plan that slashes employees without severance or benefits while putting in place incentive plans for senior management and a small group of employees, and the end game is selling off assets to the highest bidder?

You. can’t. be. serious.

There is something terribly wrong with this picture.

What’s happened over the past three years since Mike Zafirovski took over the reins, and promised a New Nortel? What about all the bullishness and optimism?

It just seems wrong to see what’s happening. And sad.

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  • broadbandbill

    It’s simple math. Start with rookie CEO’s huge ego, subtract rookie CEO’s lack of vision, further subtract rookie CEO’s lack of strategic knowhow, further subtract rookie CEO’s ability to identify true talent, further subtract rookie CEO’s execution skills and, finally multiply said result (by now a negative number) with rookie CEO’s denial co-efficient and you end up with a disaster!!!! Math, simple math…–bb

  • less

    1 – Nortel is obligated under Bankruptcy Law to create the best value possible for Creditors.This is a legal obligation.

    Its a tad late to start talking about whats “legal” and “obligations”

    2- Nortel DMS family of products

    I know from DMS, and its an energy hog. Time to turn it off. Go green, says Mikeypoo, so who are we to disagree? Does Nortel have anything smaller and efficient, yet similarly durable, to replace it? Like them filmsy Motorola ATCAs, perhaps?

  • NortelEmp

    I have no time sheet. I'm no longer a “NortelEmp”. Call me “ex-NortelEmp” if you want…

  • yes4aapll

    There is something terribly wrong with this picture.

    What’s happened over the past three years since Mike Zafirovski took over the reins, and promised a New Nortel? What about all the bullishness and optimism?

    It just seems wrong to see what’s happening. And sad.
    Mark Evans
    —–
    re
    Mike Z measured performance with with false “managerial operational margins”
    The numbers he reported were not GAAP numbers!
    The numbers were misleading public.
    The numbers were used to trigger bonuses.
    No wonder Mark Evans is surprised.
    Mike Z did not fool me with that. Mike Z did not fool me with the deferred revenue recognition!
    Nortel has started to recognize def revenues in big chunks in last 5 quarters
    In those quarters Nortel recognized more than $1.3 bill as I remember.
    There was no deferred rev recognized in Q3 2007 and earlier (in big chunks, I mean)
    So what happened in Q4 2007 that Nortel decided to recognize deferred rev in big numbers?
    My guess is that new CFO found those rev sitting in the books.
    btw
    Nortel lost 4 months and still does not have the Plan for Restructuring under Ch11!
    At this point Nortel would not be able to do restructuring on its own. Nortel needs additional $2 bill to emerge from BK protection.

  • used2bethere

    Couldn't agree more BB….

  • whatnext4nt

    and a really bad one like that guy from Pink Floyd (Syd Barrett ) had a few hundred (or was it thousand) times. :>

  • whatnext4nt

    near 100% batting average so far

  • broadbandbill

    “What’s happened over the past three years since Mike Zafirovski took over the reins, and promised a New Nortel? What about all the bullishness and optimism?”

    See 'Rookie CEO” definition in my upcoming book called 'Fail First!'..–bb

  • broadbandbill

    Thank you…–bb

  • whatnext4nt

    LTE within Nortel (with help from strong partnerships) was on a path to $ucce$$ until the company crashed and burned financially.

  • rfc1149

    Nortel is not doing everything wrong.

    Healthcare/hospitals are one example of Nortel being legitimately successful, having a good understanding of the customers and adding value (i.e. business 101).

    Unfortunately while not the only exception this is not true for large parts of the business. And obvious not enough to keep the company going:(

  • rfc1149

    And don't forget to subtract a complete lack of understanding of the telecom business.

  • NortelEmp

    This is a really interesting point. I thought I understood this part of it. I looked on the EPIC site and on the E&Y site. All of the creditors are listed as “unsecured”, as you noted.

    Does anyone know if there are any secured creditors?? When they sort out who gets what, do they simply start at the top of the list, based on who is owed the most?

  • Nortel watcher

    The assumption is that bondholders are considered secured creditors unlike current and former employees, suppliers, shareholders (common and preferred), and anyone else that doesn´t have a signed pledge of assets to show.

  • NortelEmp

    So Bank of Mellon is, in effect, a secured creditor, since it represents bond holders (as a trustee). Correct?

  • Nortel watcher

    Whether you meant KEIP or KERP, I recall the first payment for both these plans is scheduled for June 30th. Therefore, it is misleading to state that KEIP bonuses have been disbursed already.

  • Nortel watcher

    NT employees of sold businesses are more likely to go to the acquirer rather than stay behind to be laid off by NT. Simply, the acquirer needs to assess where the redundancies lie and determine accurately who is let go. Remember, the acquirer has built this liability into the acquisition price.

    It is not automatic that the NT employees will always lose out when duplicity of positions is identified. One thing is certain, if NSN buys the Carrier business, they will not need two directors for the Latin America market selling VOIP gear to the carrier market. Either the NT director or the NSN director will be shown the door soon afterward once they are sized up against each other.

    It is well known that musical chairs has been the norm lately at NT with top managers moving their friends from one directorship to another in the hopes
    of surviving the next round of layoffs. As a result, you may find NT directors lacking depth in their new business unit and lose out to their counterparts at the acquiring company.

  • broadbandbill

    Agreed! My bad; however, it wouldn’t affect the end result by much…–bb

  • Nortel watcher

    NortelEmp,

    Bank of Mellon is secured partially to the extent that its bonds are trading and this depends on bond class and seniority (subordination). Remember, under bankruptcy, bondholders are not getting their principal and interest payments from NT.

    NT bondholders are in the middle of the pack should NT liquidate because it is assumed that those banks holding promissory notes (i.e. comm'l banks) where NT assets were pledged did not lend out up to the value of those assets. Here's where looking at financial ratios comes in handy.

    The only ones made whole in this bankruptcy process will be those with pledged assets and these are usually comm'l banks.

  • overit

    Sorry, I did not mean you any harm.
    I am ex Nortel too. Before I went I did get paid for the hours that I was made to work off the clock for 2 years x2. This was about 40k. There were others. Nortel kept it very quiet. I had worked these hours and was entitled to the pay. I just wish that the others that can do something about it would stop crying in their beer and do what is right. The US Department of Labor FLSA is very clear but the employee must tally these hours and submit them to the employer. Good luck to you.

  • jssj1

    http://chapter11.epiqsystems.com/ViewDocument.a…

    lists Bank Of Mellon as an unsecured creditor.

  • whatnext4nt

    Bob Dylan wrote this three years ago, seems to resonate with what many are experiencing now at Nortel and other financial train wrecks ..

    There's an evenin' haze settlin' over town
    Starlight by the edge of the creek
    THE BUYIN' POWER OF THE PROLETARIAT'S GONE DOWN
    MONEY'S GETTIN' SHALLOW AND WEAK
    WELL, THE PLACE I LOVE BEST IS A SWEET MEMORY
    IT'S A NEW PATH THAT WE TROD
    THEY SAY LOW WAGES ARE A REALITY
    IF WE WANT TO COMPETE ABROAD

    My cruel weapons have been put on the shelf
    Come sit down on my knee
    You are dearer to me than myself
    As you yourself can see
    While I'm listening to the steel rails hum
    Got both eyes tight shut
    JUST SITTING HERE TRYING TO KEEP THE HUNGER FROM
    CREEPING ITS WAY INTO MY GUT

    MEET ME AT THE BOTTOM, DON'T LAG BEHIND
    Bring me my boots and shoes
    YOU CAN HANG BACK OR FIGHT YOUR BEST ON THE FRONTLINE
    SING A LITTLE BIT OF THESE WORKINGMAN'S BLUES

    Well, I'm sailin' on back, ready for the long haul
    Tossed by the winds and the seas
    I'LL DRAG 'EM ALL DOWN TO HELL AND I'LL STAND 'EM AT THE WALL
    I'LL SELL 'EM TO THEIR ENEMIES
    I'M TRYIN' TO FEED MY SOUL WITH THOUGHT
    GONNA SLEEP OFF THE REST OF THE DAY
    SOMETIMES NO ONE WANTS WHAT WE GOT
    SOMETIMES YOU CAN'T GIVE IT AWAY

    NOW THE PLACE IS RINGED WITH COUNTLESS FOES
    SOME OF THEM MAY BE DEAF AND DUMB
    NO MAN, NO WOMAN KNOWS
    THE HOUR THAT SORROW WILL COME
    In the dark I hear the night birds call
    I can feel a lover's breath
    I sleep in the kitchen with my feet in the hall
    Sleep is like a temporary death

    Meet me at the bottom, don't lag behind
    Bring me my boots and shoes
    You can hang back or fight your best on the frontline
    Sing a little bit of these workingman's blues

    WELL, THEY BURNED MY BARN, AND THEY STOLE MY HORSE
    I CAN'T SAVE A DIME
    I GOT TO BE CAREFUL, I DON'T WANT TO BE FORCED
    INTO A LIFE OF CONTINUAL CRIME
    I CAN SEE FOR MYSELF THAT THE SUN IS SINKING
    How I wish you were here to see
    Tell me now, am I wrong in thinking
    That you have forgotten me?

    NOW THEY WORRY AND THEY HURRY AND THEY FUSS AND THEY FRET
    THEY WASTE YOUR NIGHTS AND DAYS
    Them I will forget
    But you I'll remember always
    Old memories of you to me have clung
    YOU'VE WOUNDED ME WITH YOUR WORDS
    GONNA HAVE TO STRAIGHTEN OUT YOUR TONGUE
    IT'S ALL TRUE, EVERYTHING YOU'VE HEARD

    Meet me at the bottom, don't lag behind
    Bring me my boots and shoes
    You can hang back or fight your best on the frontline
    Sing a little bit of these workingman's blues

    In you, my friend, I find no blame
    Wanna look in my eyes, please do
    No one can ever claim
    That I took up arms against you
    All across the peaceful sacred fields
    They will lay you low
    They'll break your horns and slash you with steel
    I say it so it must be so

    NOW I'M DOWN ON MY LUCK AND I'M BLACK AND BLUE
    GONNA GIVE YOU ANOTHER CHANCE
    I'M ALL ALONE AND I'M EXPECTING YOU
    TO LEAD ME OFF IN A CHEERFUL DANCE
    I got a brand new suit and a brand new wife
    I can live on rice and beans
    SOME PEOPLE NEVER WORKED A DAY IN THEIR LIFE
    Don't know what work even means

    Chorus:
    MEET ME AT THE BOTTOM, DON'T LAG BEHIND
    Bring me my boots and shoes
    You can hang back or fight your best on the frontline
    Sing a little bit of these workingman's blues

  • How_long

    I never had a timesheet all the time I worked at Nortel. All the people I worked with put in loads of extra hours. There's no way to claim all that back – if there was, let's see: 20 years of 10 hours average a week extra work. It amounts to at least an extra years pay.

  • Theleftbehind

    It's over. NSN acquisition rumors are true. Almost done deal, ironing the last details. The enterprise division is still in dispute between Avaya, Siemens enterprise and Shared Technologies. The only think left will be CDMA and Optical plus the government solutions division. The crap of the crap

  • NTInfidel

    How can CDMA be left if the NSN deal goes through. It is main piece of Carrier Networks that NSN wants. This is what boosts their North American share of the wireless market.

    This is only slightly above rumor at this point. No one knows how this will play out. Deals fall through, competing offers emerge etc…

  • NTblinker

    Where did you find that worthy information? From WSJ?

  • roseball

    You are right about “The crap of the crap”..Thats what I make of your post from this sentence: “The only think left will be CDMA and Optical plus the government solutions division”…..The only thing NSN cares about in this whole deal is the CDMA market share it will gain…

  • felixmk

    I do not believe there are any secured creditors. All debt is unsecured. What is your source?

  • less

    CDMA is old hat. But a revamped Nortel TDMA will make a comeback as TMDA – Time Multiplied (to) Structure Anon.
    Every phone call you receive via TMDA blows off the caller with:

    “I'm currenlty busy with Chapter 11. Please call back in 6 months.”

    And then proceeds to automatically block the call number for 8-12 months – or $250 mio, whichever comes first.

  • TongueInCheek

    I could be wrong, but I honestly thought that the Long Term Bonds are secured.

  • felixmk

    It does not look like it. The info from the NRPC in the US says no secured creditors. I checked the court bankruptcy website, and there is only a committee of unsecured creditors. So, as an unsecured creditor, I theoretically have the same claim as Bank of Twaddle or India Outsource Ltd.

  • NTblinker

    NT mng. uses rumors to bleak the atmosphere while they are preparing themselves to bloody things which will occur in early May. Why i am thinking like this is because Mike Z. uses the words that don't believe in the rumors, I will announce you what will all of us face with when the business matrix reorg. plan is ready to be executed.

  • tookthemoneyandran

    If Shared Technology can put together the package and get the Enterprise business, the Enterprise employees there should be thankful. One of Tony Parella's executive measurements for Shared is that they be one “One of the Best Places to Work”..a metirc they take seriously and have attained year after year. Tony also knows Nortel's Executive and Managers…and what a bunch of dead weight they are. Enterprise would be smaller, but within 2 years would be growing, profitable, well managed and have a great leader at the top …. and a place where employee value is the basis of the business, not just something referred to in emails from managers essentially stealing from the employees.

    Shared + Enterprise = huge win for all stakeholders including customers. I wIsh them well in their pursuit.

  • mohican

    If they blog as much as you've been, I can see why they have to work twice the hours.

  • roseball

    Looks like ZMan indirectly acknowledged the credibility of WSJ article in his latest zmail and assured of making announcements in the next few weeks…..

  • less

    MIkes works twice as hard as any of you, which is why his hourly wage is twice what you make all – what, day? Week? Month?

  • overit

    I was a non-exempt Nortel worker that had suffered or was permitted to work. These hours were off the clock. I had confronted the Nortel management for this reason. I was given many reasons why I should not document this time. Nortel had given the most sickening reason why I should not get paid for my hours worked and for a long time I had agreed. It was my duty to help save this company. I did not use a lawyer. The only thing that I needed was the web site below and a tally of my hours worked. I read these rules and applied them. My claim worked its way to the top and a few came along for the ride.
    http://www.dol.gov/dol/topic/wages/overtimepay.htm
    There are exemptions for these rules for professionals and executives but some companies have tried to work around these rules for the benefit of the company. This is an article on how GE tried to cheat their exempt guys back in 2002.
    http://www.allbusiness.com/legal/legal-services…
    There was a lawyer involved in the GE thing. He is listed in the article. The lawyers get their pay from the losers. The record keeping rule only requires the company to hold the records for three years.
    Nortel only settled this with me because I was right and the US Department of Labor would have made it right if I had filed a complaint.
    Good luck to you

  • rfc1149

    Yeah – not a lot of difference between grossly incompetent and utterly grossly incompetent :)

  • 20yrsNT

    Where is the ST rumor coming from?

  • whatnext4nt

    NT CDMA isn't the crap of the crap, it is the cream of the cream, although it is in declining mode, there is still good money to be made for four more years and at very high margins, look at the NT financial statements and somewhat slow early growth predictions for LTE. CDMA footprint can be gradually transitioned to LTE in many of the NT CDMA markets. Don’t forget that Sprint is likely to admit they were wrong about WiMAX and switch to LTE. Also, don't forget that an acquisition of Nortel CDMA footprint likely assures LTE wins for the buyer in many of Nortel’s CDMA markets in N.A. including Verizon Wireless. Also be aware of the CDMA infrastructure CAPEX associate with the Verizon Wireless acquisition of Alltel and sales opportunities for the acquirer of Nortel CDMA. I think the prevailing theory is that CDMA will be acquired along with some key NT LTE assets. Furthermore, don’t forget that capturing the LTE market NT would have had with Verizon Wireless (had they not been in financial crisis) will likely lead to contracts wins with Vodafone given the JV’s. NT LTE position was weakened significantly by the divestiture of UMTS, and putting it back together with a vendor that has both GSM and UMTS strengthens this asset. Acquisition of NT CDMA+LTE has a huge business value for certain Wireless infrastructure players. Any left over assets from LTE could go to other interested parties that could kick-start or advance their position in LTE.

  • whatnext4nt

    … or anti-social in some cases, as it appears for bankruptcy situations in Canada, U.S. and several other countries … supposedly serves the greater good of society (lesser of two evils) say some wise Judges in Ontario and Delaware …

  • FlyOnWall

    Wow, what an uninformed view to assume that Enterprise is not crap. You obviously work in Enterprise and drink your own kool-aid. Pray you get taken by the acquiring company since they really want Nortel dead wood personnel.

  • FlyOnWall

    Wow, what an uninformed view to assume that Enterprise is not crap. You obviously work in Enterprise and drink your own kool-aid. Pray you get taken by the acquiring company since they really want Nortel dead wood personnel.

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