$1-billion, Please

By Mark Evans | Published: June 9, 2009

Do you think the Canadian government would be willing to give a group of private investors a $1-billion loan to buy Nortel?

Honestly, it sounds like a wild proposition but who knows what could happen given the Canadian government handed $6-billion to General Motors.

For more, check out CBC.ca.

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  • vvvv

    Succession aka Carrier VoIP aka CVAS has never made a sustained profit, despite its strong market share and having a high-margin contribution from supporting the DMS business.

  • Nortelian

    True, but that huge TDM base is not going to disappear overnight. 10 years ago, there were 10,000 DMS switches. Today there are 7,000. Customers are generally slow to adapt IP switching for now because 1) it's more complex than they thought, 2) the demand for residential VoIP is still in the early stages, and 3) the need for a broadband access network is driving most telco spending. Nortel sold off their access business back in 2001. Service & network models nationwide for all carriers large and small will start to look like FIOS. Nortel is amazingly enough, well positioned to steal share from the current market leaders with their new FTTP product. It's the technology coming out of the LG – Nortel JV that is being deployed in Asia, Europe, and very soon North America. Nobody else has this technology in the carrier space at the moment and it's in the sweet spot of the market. Anyway, I digress.

    Customers are starting to look harder at softswitching. The burning desire to move to broadband access networks is driving the need for IP interfaces for voice switching. Customers are reluctant to put money into TDM eqpt of any kind, including access networks so if they plan it right and use gateways properly, they can also evolve themselves into a softswitch.

    At any rate, while I don't disagree with your assertion regarding CVAS profitability, those 700+ CS2000's out there, drive large parts of the worlds public IP voice networks, and the CS1500 softswitch is growing base quickly. That represents serious value. Nortel is well positioned but needs to “resize” this business to reflect new realities, not just summarily executed as some would have.

  • gmg733

    So where is the Enterprise deal. Lastest rumor is the announcement has been delayed because the NT management can not come to an agreement as to what their golden parachute payout should be. Go figure.

    Personally, I think this is non-sense since that is usually contractual stipulated, but I don't know how the rules change in Chapt 11.

    To that end, I have been trying to provide some insight into what is happening within the company as everything is pretty much silent to the public. Regardless, at this juncture there is growing fear the dorks at the top are so inept they won't be able to get this done. In fact most managers are say, “Whatever!” So even the first and second tier faithful are losing faith.

    Here is a scary notion and speculation, if Siemens-Gore buys Enterprise who just let their CEO walk, who is the logical person to take the job? I'd hope the buyer has the sense to leave the current bozo NT management to waste on their piles of cash they stole.

  • protosphere

    It is ironic that they want money but won't appear before Members of Parliament to discuss why they are getting bonuses under bankruptcy while cutting employee severances.

    http://www.theglobeandmail.com/globe-investor/n…

    “Nortel says it won't appear before MPs “
    “A day after receiving the invitation, Nortel said yesterday it would decline on the advice of its lawyers.”
    “all matters specified in the invitation are before the courts. “

    (Reminds me of their answer to further inquiry or penalty when restating a restated restatement. They claimed “work was already done” when revisions encompassed even future periods. Tanked ultimatum settlement to claim profits on having to pay less…)

    “Respectfully, Nortel on the advice of counsel, declines the invitation.”
    (As in “all due respect” which really means with no respect at all….)

    “Some members of the finance committee made it clear they wanted to question the CEO on the lucrative bonuses, at a time when the Toronto-based company has used creditor-protection laws to withhold payments to thousands of laid-off workers and reduce pension payouts to retired workers.”

    “We're trying to understand how that company is reasoning that they need those massive bonuses for the senior execs and they are still making decisions that will deprive people who have worked there and contributed and built the wealth in that company.”

    “It does seem to offend your sense of fairness that certain people seem to be doing very well out of a bankruptcy and others seem to be left holding the bag. Inarguably, they each made important contributions to the viability of the company.”

    “Mr. Mulcair said public response to Nortel's situation is mounting and represents the strongest reaction to any issue he has seen in 15 years of politics.”

    “We thought it was only appropriate in our system that we give Nortel a chance to give its side of the story,” Mr. Mulcair said. “We'll be hearing from the other parties nonetheless.”

    “After Nortel filed for protection, Mr. Zafirovski held discussions with federal politicians about the possibility of government assistance. Those talks failed to produce any direct assistance. “

    “Mr. Zafirovski received compensation of $9.7-million (U.S.) last year.”

  • protosphere

    I do not talk to Nortel customers every day, no. That's a redundant question.

    Can you answer
    what many areas?
    what parts of optical? PBT peanuts?
    are the gagged analysts determining marketshare wrong?
    are their declining numbers reflecting demand with the customers you speak with daily?
    can you be more specific on any of these facts they STILL have great technology to lead in any one area let alone the “many” you claim as a salesperson there?

    I do not even believe you are a salesperson there with the caps as a dead giveaway, no offense. The fraud at Nortel is overwhelming.

  • protosphere

    Even if they could sell any of their rapidly depreciating assets, this would never cover what they owe.

    Everyone is becoming increasingly impatient with NoTell's tactics of late to a degree of overkill.

    Being hopeful is only being increasingly delusional by the day at this stage with manyu fabricating in hope for years.

    Never mind optical, they ruled that a decade ago but they have squat today. Bankrupt and still disgracing themselves with bonuses.

  • yes4aapl

    Thank You Proto for that one
    WTF is going on?
    The word was Summon!
    summon
    summon
    summon
    My ESL teacher says it's the same as subpoena
    but hey
    Mike Z lawyers say it's an option.
    WTF?
    How the MPs can work in your country Proto if Mike Z can not be questioned?
    Let me be clear about Mike Z.
    He is a shameless manager who destroyed Nortel in last 3 years!
    Where is the Plan, Mike? /that's the question/
    even the Psychiatrist will have to support my motion about CEO on this blog….

  • tryn2makealivin

    Chrysler was in Chapter 11 for how long? Nortel could have sold off pieces if not the whole ball of wax multiple times now. Bottom line is, if its not profitable for the GE Squad it is not going to happen and they have blown deal after deal. As each day passes the units value drops much like the revenue.

  • Ex_NT_183

    So the rumor going around the Ottawa campus yesterday ( a close friend still works there) is that Mike Z made a statement at Global Connect, saying Enterprise is sold and the announcement will be made before months end.

  • NTblinker

    previously we heard a different version of your estimate that a vice president's close friend's friend had said ent. would be sold but nothing done yet.:)

  • Nortelian

    You can believe what you want. I've been in Nortel sales for over two decades. Telecom in general for almost four decades. I'm not a spring chicken. I've been through the Roy Merrills and Des Hudson days. I've seen Paul Stern nearly destroy this company & watched Jean Monty revive it.

    Optical strengths: WDM PON, OME6500. MEN: ERS8600. All are very strong and are market leaders in their respective segments. The Fed Govt & military both use ERS8600 extensively and the army just executed another large contract installing hundreds more. Only exception being WDM PON which is still new in the space, but well ahead of the competition. The CVAS portfolio, #1 worldwide. Don't take my word for it, Dell 'Oro just reported it this week.

    If you believe everything the analysts say, I have a bridge you might want to buy. The fact that you believe analysts any more than Nortel's fraudulent execs tells me something about your beliefs. How many of those same analysts have been correct (or even close) over the past decade of market prognostication.

    Short of giving you my employee ID, I'd have no way to prove my Nortel sales credentials. I prefer my anonymity because I do still need a paycheck. And what do caps have to do with this? Seriously. You must be someone who has been hurt by Nortel, so am I. I won't elaborate so as to maintain my anonymity. You are painting all of Nortel with the same brush and that's just not appropriate. Don't blame me or any other rank & file worker bees for the fraud at Nortel. I have been equally disgusted by it. Letting that blind you to the value that does exist though is shortsighted at best. Since 2000, Nortel exec management has been intent on killing the goose that laid the golden egg to put more money in their pockets. None of them ever addressed the $12B in debt accumulated prior to the bursting of the internet bubble. So now we all pay the price for that.

    I DO (caps intended for emphasis) talk with customers every day. Nearly all ILEC's have pulled back and it's not because they dislike Nortel. It's because they are under severe competitive and market pressures. They are losing access lines & revenues and are struggling to make ends meet. I have customers whose revenues are down by 25%. Certainly not their choice, but many of them have never had to seriously compete before and are at a loss to respond. A drop like this does affect spending.

    I agree that the fraud at Nortel is overwhelming, but those of us at my level, continue to work hard, focusing on keeping our customers. You seem to be more intent on cursing the darkness that is Nortel's position these days. I prefer to light a candle and work through it.

  • vvvv

    Problem is, those installed DMS machines aren't generating revenue for Nortel anymore. Most carriers have frozen the software loads and have taken the switches off hardware maintenance. With declining TDM traffic, the carriers have more than enough spare parts to service the switches themselves indefinitely. Besides, Nortel and its CMs can't manufacture most of the DMS packs anymore.

    JR did get Nortel out of the access business. Can't second-guess him on that; the portfolio of AccessNode, UE 9000, UE IMAS, etc was a loser. Ironically, access turned out to be a hot market. Maybe LGN can sell ONTs, but that's only part of the opportunity. In any event, LGN would be better off alone — just like Arris, who did splendidly after they completely broke away from Nortel.

    There is definitely demand for softswitching. If Nortel had their product cost under control, maybe they could monetize the demand. But product cost is a killer in many (most?) Nortel businesses.

  • Nortelian

    Those installed DMS machines are all targets for CS2K & CS1500. Not all will transform but many will. There is certainly no money in the TDM hardware business but there still is in SW & services associated with those machines. I get orders all of the time. That base does continue to generate revenue, albeit not like it used to because of the decline in telco wireline access lines from wireless, cable, and CLEC competition.

    Agreed that AcN & UE9K were dogs. Too complex & expensive (in typical Nortel fashion). The WDM PON product though is ahead of the competition and as of right now, there is not a single vendor out there with comparable technology. It is the only access product that Nortel has and the business is not just the ONT's. The OLT's and PON blades are a vital part of that business.

    Lastly, product cost has been an issue for Nortel as long as I've been with them. If they would do away with the ridiculously lengthy & complex WIN form process and move to a quicker. simpler, approval process for pricing, quotations, and other administrative functions in general, the LC's could begin to cut cost from their products. Everyone is too focused on the trees to see the forest.

    But again, I see no reason to just throw this all away. Check out AlcaLu's recent numbers. They're worse than Nortel's. NT is not the only vendor experiencing these problems at the moment. Just the one with the most debt.

  • TongueInCheek

    A new article on this topic is available on itworldcanada

    http://www.itworldcanada.com/a/Leadership/1641d…

    which includes the following statement:

    “The former executives are currently approaching financial organizations to help raise $1 billion — enough cash, they hope, to gain a seat in bargaining table and get a peek at Nortel's most current data to be able to fine-tune their restructuring plans for the company. The group is not, Craig stressed, seeking a government loan, as was previously reported.”

  • Asset_Number_XXX

    “In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me…. It won’t work. It can’t work… It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.” Ron Paul – Nov 2008

    Why buy the parcel of land with the crummy house on it, when the street has plenty of clear ones to build on? It is my belief that employees are jaded beyond resurrection. I mean no offense, don't speak in anyone's name, just share my observations.

  • yes4aapl

    Asset_Number_XXX
    re
    You are right in general sense of free market economy. That's the idea but the world is not the ideal one. Nortel failed in part because the fierce competition and direct ZTE and Huawei attack. Are the mentioned companies using fair play? I don't think so. As long as there is no fair play in the market you can write books about your ideas.
    I say
    There is a need for political solution to Nortel's problems! .
    Someone has to clean the mess and start it again.
    Nortel will have to die in the form in which it is now but can be born again in another form or shape.
    btw
    The group is not seeking a government loan, as was previously reported. Ian Craig stressed,

    “A group led by former Nortel president Robert Ferchat is hoping to raise $1 billion to keep the company in Canadian hands and is asking the government to delay the sale of its assets”
    the article says..
    Is Nortel veterans' call to save company falling on deaf ears?
    By: Nestor E. Arellano and Greg Meckbach
    http://www.itworldcanada.com/a/Daily-News/1641d…

  • soundslikesourgrapes

    Debt.
    What are you talking about.
    They don't have debt.
    Remember the word bankruptcy protection.

  • Asset_Number_XXX

    “In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me…. It won’t work. It can’t work… It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.” Ron Paul – Nov 2008

    Why buy the parcel of land with the crummy house on it, when the street has plenty of clear ones to build on? It is my belief that employees are jaded beyond resurrection. I mean no offense, don't speak in anyone's name, just share my observations.

  • yes4aapl

    Asset_Number_XXX
    re
    You are right in general sense of free market economy. That's the idea but the world is not the ideal one. Nortel failed in part because the fierce competition and direct ZTE and Huawei attack. Are the mentioned companies using fair play? I don't think so. As long as there is no fair play in the market you can write books about your ideas.
    I say
    There is a need for political solution to Nortel's problems! .
    Someone has to clean the mess and start it again.
    Nortel will have to die in the form in which it is now but can be born again in another form or shape.
    btw
    The group is not seeking a government loan, as was previously reported. Ian Craig stressed,

    “A group led by former Nortel president Robert Ferchat is hoping to raise $1 billion to keep the company in Canadian hands and is asking the government to delay the sale of its assets”
    the article says..
    Is Nortel veterans' call to save company falling on deaf ears?
    By: Nestor E. Arellano and Greg Meckbach
    http://www.itworldcanada.com/a/Daily-News/1641d…

  • soundslikesourgrapes

    Debt.
    What are you talking about.
    They don't have debt.
    Remember the word bankruptcy protection.

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