Tasman Networks: The Beginning of the End

By Mark Evans | Published: December 30, 2009

There are lots of reasons to explain why Nortel has crumbled in recent years to near-extinction but if you had to pinpoint a key moment in its demise, it might be the acquisition of Tasman Networks, which was announced on Dec. 27, 2005.

The deal happened a few months after Mike Zafirovski had taken over as CEO from Bill Owens. If anyone was looking for Mike Z. to start his new gig with a major bang, the purchase of Tasman Networks was a disappointment. In the scheme of things, the $99-million acquisition was a baby step when Nortel needed to take giant steps to reinvent or reinvigorate itself.

As well, it’s important to point out that the Tasman deal was one of the few acquisitions made by Nortel during Mike Z’s. Reign of Error. This was despite the fact he lured an M&A top-gun, George Riedl, from Juniper Networks in early-2006.

The major moves that Nortel could have made to transform itself never happened. As a result, Nortel continued to lose it status as a first-tier telecom equipment supplier that didn’t dominate any particular business.This isn’t to suggest one deal could have been the silver bullet to resuscitate Nortel but, in hindsight, it might have made a difference if Nortel had made big, bold move.

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  • random123

    Comments in other thread here say that CVAS had (has?) 61% of the North American Market (carrier grade Class 4 & 5 switches) . 61% sounds pretty dominant to me.

    I guess I am wrong, so just what percentage is needed to 'dominate'?

  • wasthere

    Tasman was a non-event. They needed the Tasmanian Devil to shake them up !

  • Panhead

    One must remember when reading this blog that the comments are coming from experienced social media consultants.

  • RamblingFish

    61% of North American… Below 30% of the Global Market… And a cost structure that is non-competitive against rising Asian vendors. Voice / VoIP is a near-commodity market, and rapidly being driven further down the cost curve. So while having a dominant footprint is well and fine, it's a business that's going to generate less and less cash unless one explores the adjacent business opportunities. Take further that the complexity and total cost of ownership of Nortel's CVAS portfolio is absurdly high, and you have a business that can't stand on its own.
    It would have been most logical to take the cash CVAS generated and build into adjacent businesses; see Ribbit, Twilio, JNetX, Apeona, Jajah as an example of a space Nortel started no less than 4 products in and failed to bring any to market in the Carrier space. A lack of understanding at the senior and executive levels, and dogmatic attachment to sunk cost products (MCS5200) has made CVAS a brick. The stalking horse by Genband is little more than taping two bricks together and hoping they float.

  • protospherical1

    Tasman was not making money and it was already financially supported with injections even before Nortel bought it.

    They also paid a huge premium for Tasman, almost 10 times more it's worth according to analysts at that time.

    Owens' PEC was also a disaster, perhaps they didn't keep Owens long enough to see if he could sell what they renamed it to, crying for business NGS I'd named it NFG… a deal analysts hated from inception.

    Tasman cost under a quarter of what they paid for PEC. $450M US I think…at under half its value months (200M) let alone what it sold for recently as part of a bus. unit firesale), PEC failed like their past acquisitions needless to say… as did tiny Tasman

    Emphasizing Tasman R&D was happy talk.

    Heh…was the strategy to get a lower cost router suppy? …for bonuses than sincere efficiency…Wat was wrong with their current supplier, they didn't lead in this space anyways for all the difference the costs of suppliers would make …

    I guess cuts cuts cuts are needed when money is precious, like buying a greener jet to save? heh, did they get bonuses on the savings there too?!

    The very reason they might inject funds wrongfully may be to their benefit but the company's peril… maybe ti was a who cares the ship is sinking anyways defeatist thingy, one would think these errors are not allowed to go on in big business or essential services though. =)

    these bozos get paid more than doctors to dilute and bonuses themselves with no personal loss…..they can do whatever they want jumping careers to a company they sold from their last one. =)

  • protospherical1

    huh?

    horsefeathers

  • protospherical1

    “Ribbit, Twilio, JNetX, Apeona, Jajah as an example of a space Nortel started no less than 4 products in and failed to bring any to market in the Carrier space.”

    Neptune, Dolphin, Titan, etc…all under water =)
    “taping two bricks together and hoping they float.” LOL

  • protospherical1

    Boldest move would have the dog roll on its back in submission to Cisco (who they use to spit at behind closed doors) but Cisco took the high road and did not want any part of Nortel early on…. Nortel went on to flame ex Cisco people …and even product as a tax misleadingly… I wonder if they were possessed

    Nortel wanted to be the acquirer not the acquiree.

    Heck, Zman thought he could lead even larger companies!

    =)

  • less

    “Tasmanian Devil'
    “da Z'manian Devil”
    phonetically so close, yet altogether diametrically opposed in performance circles.

  • wasthere

    Yep ! Will be remembered as : Mike Zariflopski !

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  • Teleguy

    Nortel could not afford any acquisition by 2005. If you are looking to point fingers at CEOs who bought stupid acquisitions, let's revisit the dreamy reign of John Roth. Hundreds of millions were spend on companies with technology that didn't even work.

    And a $99 million acquisition in the telecom business that Nortel was playing in doesn't even register as a silent fart. It certainly would not have made a wit of difference to Nortel's rebirth, or to the investors interest in its success who were fucked over for years at this point. It would have made a difference to the employees morale.

    This is not a key reason why Nortel is dead.

  • Teleguy

    Cisco would not even understand Nortel's technology, so I am not sure why people keep bringing up Cisco as a buyer of Nortel. Is it because you are American and the marketing job Cisco has done on you people has brainwashed you to believe that a router company can run a telecom company. You people are morons.

  • Teleguy

    Nortel could not afford any acquisition by 2005. If you are looking to point fingers at CEOs who bought stupid acquisitions, let's revisit the dreamy reign of John Roth. Hundreds of millions were spend on companies with technology that didn't even work.

    And a $99 million acquisition in the telecom business that Nortel was playing in doesn't even register as a silent fart. It certainly would not have made a wit of difference to Nortel's rebirth, or to the investors interest in its success who were fucked over for years at this point. It would have made a difference to the employees morale.

    This is not a key reason why Nortel is dead.

  • Teleguy

    Cisco would not even understand Nortel's technology, so I am not sure why people keep bringing up Cisco as a buyer of Nortel. Is it because you are American and the marketing job Cisco has done on you people has brainwashed you to believe that a router company can run a telecom company. You people are morons.

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