Now What, Nortel?

Now that Nortel has walked away from the UMTS radio access market by agreeing to sell the business to Alcatel, what is Nortel today other than $400-million to $500-million smaller in terms of sales and $200-million more profitable? In other words, what is Nortel’s strategic direction? What’s the IMS strategy? What’s the VoIP strategy? What’s the wireless strategy given Nortel is now focused on 4G, WiMax and CDMA and GSM? Since taking the helm last November, CEO Mike Zafirovski has focused on overhauling the senior management team and cutting operating expenses – two major issues. He has also talked about having at least 20% market share for a business to considerable viable, which is why the UMTS unit was sold. What investors need is a strategic road map to demonstrate where the New Nortel is going? Will the New Nortel reduce its R&D ratio to 15% from 20%; will the New Nortel make strategic acquisitions; will the New Nortel get even smaller as its drive to become profitable? BusinessWeek’s Deal Flow quoted analyst Jeff Kagan saying: “As Nortel redefines their business model I expect more of these kinds of announcements. It seems if they cannot lead and be profitable we can expect to see Nortel get out of any business.” Rich Tehrani also has some thoughts about a smaller Nortel.
Update: Some additional insight comes from Ross MacLeod, who used to be the lead developer on Nortel’s UMTS technology.

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2 Responses to “Now What, Nortel?”

  1. jayemmay Says:

    As someone born and raised in Toronto, I’d like to see NT revitalized. But even under the new management, things do not seem to be going well. In your blog you raise many interesting points: Just where is NT headed? Here are some general comments of mine.

    The 20% market share was supposed to be a target, not a standard. In selling the UMTS Access business, NT must have concluded it could not reasonably attain that target. Why is it that NT thinks the UMTS Core business is worth keeping? Aren’t these products related?

    NT is passing along its UMTS Access customers to Alcatel. If Alcatel thinks it can succeed in that market why can’t NT? More importantly, when Alcatel customers are ready for 4G, why should they retun to NT?

    Although NT hopes to be a leader in 4G, they have lost Sprint Nextel to Samsung. And Sprint Nextel is an existing customer of NT. By the way, Sprint Nextel expects to be up and running by 2008. Elsewhere I read that the spectrum auction for 4G is not taking place until 2008. Somehow, Samsung is making do with existing spectrum for its 4G.

    Although a number of analysts think that NT needs to get smaller to succeeed, others think it needs to bulk up. I think NT needs to be successful, and if it is it will naturally get bigger.

    Thakns for the opportunity to commnet.

  2. whatisthefuss Says:

    whatever you said, jayemmay.

    the CEO and BOD members are a worry free family.

    remember the strip down personal computer that did not take place duirng the tech boom? this idea is making into top executives. think this way – smaller company and fewer groups to manage and status reports to read.

    why cook your lunch or dinner when you can get them for lower cost?

    the same idea – why grow and manage the current company when buying a new company is cheaper with borrow money ? find low or Interest free loans !

    when the banks, insurance and law companies are in the buying process the deal is near to the end or completed!

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