Archive for December, 2005

Nortel Sells Volt Delta Stake

December 29, 2005
Only Nortel would come out with a double-shot of news on the week between Christmas and New Year. Earlier this week, it acquired Tasman Networks for $99.5-million to build a presence in the corporate router market. Today, it announces the sale of a 24% stake in Volt Delta for $56.4-million. Nortel picked up the equity position last year after “contributing” some assets and liabilities of its directory and operator service business to Volta Delta. If anything, this deal and the series of senior management changes suggest Nortel CEO Mike Zafirovski is busy cleaning house as he prepares to overhaul the company strategically and operationally.
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Nortel Demos HSDPA

December 28, 2005

A quiver in Nortel’s technology portfolio is HSDPA – otherwise known as 3.5G – which is used to make wireless networks even faster. Nortel is particularly stoked about HSDPA because its wireless business, which accounts for a majority of sales, badly needs a jump-start to catch up with rivals such as Ericsson and Nokia. Earlier this week, Nortel said it has completed a demo with Belgium-based Option NV of high-speed data card calls that achieved transmission rates of 3.6Mbps. The question facing HSDPA is whether it will or Wi-Max will be accepted as the next-generation technology for high-speed wireless networks.

Nortel Spend $100M for Tasman

December 27, 2005

Well, what do you know? Nortel has made an acquisition. In fact, it has bought a company that actually makes telecom equipment as opposed to a second-tier system integrator (PEC Solutions) that caters to a single vertical – the U.S. government. Nope, not this time. Nortel is spending $99.5-million for Tasman Networks, which makes IP routers for corporate customers. Without providing instant-analysis on whether the deal makes sense (I mean, do you really want to go head-to-head in the router market with Cisco and Juniper?), it is definitely encouraging to see Nortel finally make a strategic technology acquisition. You have to remember this is a company that has sat on the M&A sidelines for several years (excluding PEC, which gobbled up $443-million of cash earlier this year) as it grappled with an accounting scandal and a new CEO focused on what he knew best – the U.S. government, U.S. military and security. At a time when Nortel is trying to reduce spending and make its R&D more “efficient”, the lack of strategic deals was puzzling when rivals such as Cisco, Lucent and Alcatel were buying cool start-ups. This is just another sign that new Mike Zafirovski is wasting no time putting his stamp on the company. Tasman’s investors include Harbinger, Mayfield Funds, New Enterprise Associates, Parker Price Venture Capital. However, according to Light Reading, the deal isn’t a “home run” given Tasman raised $90 million in venture capital and went through several make-overs.

How Owens Was Replaced

December 24, 2005

The Globe & Mail has a long feature on how Nortel went about replacing Bill Owens with Mike Zafirovski as CEO. It focuses on how the process was led by chairman Harry Pearce, and how Owens knew it was happening as he planned on retiring. Apparently, Owens played a “charade” by giving everyone the impression he intended to stay on as CEO. If this is true he should head to Hollywood because he had a lot of people fooled. If you look at some of the statements Owens made when asked about his plans by analysts, it was clear he was enjoying being CEO of a large company – a gig he waited 10 years to get after leaving the U.S. Navy. And the whole fiasco with Gary Daichendt, who left after three months as COO in May, was focused on Daichendt’s desire to become CEO and Owens’ intentions to stay on. According to Daichendt, Owens did not want to retire. Finally, at the press conference to announce Zafirovski’s appointment, Pearce said that Owens was involved in the hunt for a new CEO but Owens admitted he didn’t meet Mike Z. until three days earlier. It’s all a very strange tale but nothing surprises at Nortel.
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Looking Ahead to ’06

December 23, 2005
Canadian Press has a nice end-of-year feature on Nortel and its new CEO Mike “Mr. Z” Zafirovski. Among the issues raised are Nortel’s growth (expected to trail t by turfing its all-things-to-all-people approach. While Nortel has stabilized itself, the reality there are still plenty of challenges lying the weeds. The first hurdle will be the refinancing of $1.6-billion of debt that comes due in February and June. Does Nortel go to the junk bond market? Does it issue equity? Does it use some of its much-needed cash? Zafirovski is also going to have to make some tough decision on whether Nortel needs to be downsized. Does he, for example, get rid of the enterprise business, which apparently still accounts for only 10% of revenue despite Nortel’s brave talk it is committed to the market. Perhaps Mr. Z. needs to make a call – if he already hasn’t done so – Mr. C. (a.k.a. John Chambers) about an alliance with Cisco. The CP story raises the troubling notion that Nortel’s growth is being hindered by its inability to keep pace with its rivals in the wireless market. This used to be Nortel’s bread and butter so you have to worry if that business is struggling. From what we’ve seen so far from Zafirovski, who has yet to given interviews with the media, he’s been busy overhauling his management team, which should come as no surprise. Once that process is completed, then Nortel will have to hammer out a well-defined strategic to determine where and how it wants to operate. Needless to say, 2006 is going to be a huge year for Nortel and Mike Z.
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New HQ

December 20, 2005

Hey, Nortel’s got a new corporate headquarters in lovely Etobicoke, Ont. In a classic case of downsizing, Nortel is moving from a one-million sq. foot facility in Brampton on a 63-acre site to a cozy 11-story, 160,000 sq. office building. Best of all, it’s just a short hop, skip and jump from Toronto’s Pearson International Airport, which makes it super-convenient for all those U.S-based senior executives who just can’t bring themselves to live in Canada.
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Richardson Checks Out

December 20, 2005

Is Mike Zafirovski cleaning house at Nortel? It certainly looks like it after the company said chief marketing officer Clent Richardson will be leaving March 1 due to “personal reasons”. Richardson plans to move his family from Toronto to the west coast. I guess it saw another Arctic-like winter coming his way and figured it was time to flee to a warmer climate! Some other Nortel senior executives who have already “moved on” Sue Spradley, president of global service and chief research officer Brian McFadden.

Frank Dunn’s Lawsuit

December 18, 2005

Anyone else wondering what’s going between Nortel and ex-CEO Frank Dunn. It’s been 20 months since he was fired for “cause”, and little has emerged in terms of Nortel suing Dunn, or Dunn suing Nortel. When and/or if the lawsuits are filed, they would hopefully provide some of the salacious details of what went down in early-2004 when Dunn and his CFO, Doug Beatty, and controller, Michael Gollogly, were abruptly terminated by Nortel amid an emerging accounting scandal. Did they really cook the books to trigger a lucrative bonus plan as Nortel alleges? If so, what role should the board play in approving a system that compelled these executives to go for the pot of gold at the end of the rainbow?
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Nortel Back in the Access Game?

December 17, 2005
In what was one of many unwise moves, Nortel got out of the high-speed access business in 2001 – just when the broadband market was poised to take off. However, according to TD Newcrest analyst Chris Umiastowski, Nortel is looking to get back into the access market using gigabit passive optical networking (GPON) technology. Umiastowski believes Nortel’s window of opportunity is the fiber-to-the-home market (FTTH) that is just emerging as carriers such as Verizon look for technology that will give them a huge pipe into households. Nortel recently responded to a joint RFP issued by Verizon, BellSouth and SBC. The competition includes Tellabs, Motorola, Lucent and Alcatel.
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Why a Blog on Nortel?

December 16, 2005

Hey, we’re all still obsessed with Nortel even though its lustre has evaporated – as well as three CEOs in the past four years. At dinner parties, during taxi drives and dentist appointments Nortel continues to be lively discussed. Why? Beats me, but I figure most Canadians own Nortel in one way, shape or form in mutual funds or other investments. Some of us even own shares we bought at the peak of $124.50 (yikes!) when CEO John Roth was telling us the sky was the limit. Then again, Roth sold out when the going was good with a cool $135-million so perhaps he knew something the rest of us didn’t! Anyway, this blog aims to provide some insight, intelligence and humour into the mix.