With high-speed wireless networks all the rage, Nortel and Qualcomm are flexing their marketing muscle with a claim they have set a new download speed record of 7.2Mbps using 3.5G technology. They plan to show off the technology, which uses Nortel's HDSPA equipment and Qualcomm's mobile station modem MSM6280, next week during the CTIA Wireless show in Las Vegas next week.
Archive for March, 2006
Nortel CEO Mike Zafirovski is meeting with the media
today (sorry, it's next week) in Las Vegas (sorry, no Webcast for you!) for the first time since his hiring was announced nearly five months ago. So what should he be grilled…er, I mean asked about? Here are few suggestions:
1. What is Nortel's enterprise strategy. Does it intend to go head to head with Cisco or pick its spots? What does Tasman Networks's acquisition indicate about Nortel's approach to the router market? Is Nortel aiming to make the big two (Cisco, Juniper) the big three.
2. Where does PEC – a deal orchestrated by ex-CEO Bill Owens – fit into the scheme of things? Sure, there's a new services strategy but PEC is a one-vertical pony (the U.S. government). How does Nortel plan to leverage PEC?
3. Where do acquisitions play within the 20% market share strategy? What areas are the most ripe for acquisitions within the product portfolio?
4. What are the plans for R&D? At the RBC Capital conference in Whistler in February, Mike Z. talked about unveiling his strategy the following week but it has yet to happen. Is Nortel still planning to spend $1.9-billion a year on R&D.
5. What does NT think about the proposed Alcatel-Lucent merger? Does Mike Z. think this is a sign of things to come? If so, what's Nortel's competitive approach?
After working behind the scenes since taking the helm in November, Nortel CEO Mike Zafirovski suddenly wants to talk. Next week, he’ll participate in a press conference at the CTIA Wireless show in Las Vegas. A couple weeks later, he’ll deliver the keynote address at the North Carolina Technology Association’s annual CEO Conversation conference. While it’s nice to see Mike Z.’s public profile grow, it will also be good see Nortel’s fourth-quarter and 2005 results.
Not that it really matters but 189 Nortel executives – including CEO Mike Zafirovski – will be barred from trading their shares after the Ontario Securities Commission filed a cease-trade application yesterday. The order would last until two days after Nortel files its financial statements – whenver that happens. With the stock trading at below US$3 (C$3.50), you would think Nortel shares would have nowhere to go but up. From a public relations point of view, it looks good on Nortel because it suggests their executives are in the same boat as regular investors. At least this move looks better than when ex-CEO John Roth sold the last of his shares because it pained him to see them trading below $1. Of course, Roth was feeling the pain while watching TV at his estate in Caledon, Ont. while taking a break from washing his car collection. We should all be so lucky.
According to Information Week, Nortel CEO Mike Zafirovski will spill some of the beans this week about the New Nortel. This will include a new, streamlined global services business that will focus on 70 "discrete" services rather than 700. Mike Z. believes that with a better on services, which now account for 20% of Nortel's sales, that part of the business can double in size. The press release that came out this morning can be here. Nortel is also apparently looking to improve its standing in the enterprise data networking market, where it lags behind Cisco and Juniper. A part of this initiative was the launch last week of new routers for branch offices – based on technology from Tasman Networks, which was acquired last December for $99.5-million. A high-end enterprise router is expected to be introduced later this year.
In the wake of the Alcatel-Lucent mega-deal, there's lots of speculation on who could buy Nortel. Desjardins Securities analyst Paul Howbold stepped up with five candiates, the top one being Ericsson. Here's how he maps out the contenders:
Ericsson. Re-enter the CDMA market, gain further scale in wireline technologies to boost IMS/FMC, CEO has a history of completing multiple acquisitions. However, Ericsson has no interest in the Enterprise division (although it could be sold) and recently acquired Marconi fixed line assets. There also could be some anti-trust concern regarding the merged company's share of the UMTS market within Europe. Nonetheless, we consider Ericsson the most likely bidder.
Nokia. Broadly similar reasons to Ericsson, although the company is more focused on its handset business.
Siemens. The directly analogous move to Alcatel/Lucent, there would be substantial synergies from combining the wireless businesses of the two companies (in UMTS and GSM), as well as possible R&D savings in the Enterprise business (which would span North America, the UK and continental Europe). However, Siemens has considered divesting its communications division, and previous talks with Nortel broke down.
Motorola. Substantial synergies would be available by combining the UMTS/GSM and CDMA business lines, as well as wireline and WiMax offerings. The deal would also avoid the substantial cultural differences of a cross-continental deal. However, we note that as with Nokia, Motorola is more focused on its handset business.
Cisco. Although Cisco would like to enter the wireless market, we remain sceptical that it would like to take on Nortel's legacy businesses (possibly reducing Cisco's trading multiple). We also believe that Cisco remains focused on integrating the Scientific-Atlanta acquisition.
Update: There are also some analysts talking about a deal between Ericsson and Juniper.
You have to wonder what Nortel CEO Mike Zafirovski thinks about reports that Alcatel and Lucent are in discussions about $34-billion merger? While they will only admit to be talking, a deal could have huge ramifications on the telecom equipment landscape. Nortel, for example, would find itself with a formidable competitor in “Alcacent”, and the speculation about Nortel doing a dealing itself – possibly with Siemens – could intensify. The Alcatel-Lucent deal, which has been rumoured before, is the kind of itransacton the equipment industy has expecting for the past several years because it is widely believed the market has to consolidate. So far, however, everyone has been afraid to make the big leap. That said, there have a series of joint ventures (Nortel-Huawei, for example) established, which suggests there’s a lot of dating happening but everyone is still commitment-phobic and refuses to get married. Maybe we’ll hear what Mike Z. thinks about the Alcatel-Lucent deal when he meets the press next month at the CTIA wireless conference in Las Vegas.
Maclean’s columnist Steve Maich thinks Nortel needs a new name to “make a dramatic break from the past”. The problem, he said, is Nortel’s current name is associated with an accounting scandal rather than innovation. I’m not sure a name change is the right given it is so hard to re-establish a world-class brand but I do see Maich’s point. But rather than going through an expensive re-brand, Nortel is re-making itself with a new executive team, a new board of directors and a new strategy.
Nortel and Minerva Networks have announced the joint development and release of an API that will integrate real-time IPTV services with Minerva’s iTVManager software. Nortel is driving hard on IP-TV as it drives to leverage its IMS platform. “IPTV is more than simply delivering television services over an IP network,” said Walt Megura, general manager, broadband with Nortel. “The real power of IPTV is in the merging of entertainment and communications, the integration of telephone features into your television experience, and the mobility of video services that follow the user anywhere, anytime.”
As the New Nortel continues to evolve, the company is combining its carriers data and enterprise data businesses into a single organization. The unit, known as converged data networks, will be headed by Aziz Khadbai, a 16-year Nortel veteran. The move "furthers our ability to provide feature-rich converged networks that support critical real-time applications including voice, video and multimedia applications," said Steve Slattery, president of enterprise solutions and packet networks. So what does this organizational shuffle suggest? Does it mean Nortel’s data enterprise business isn’t doing well enough to justify having its own unit? Or does it insuate this is just another move by Nortel to reduce operating costs as CEO Mike Zafirovski attempts to make the company more streamlined and efficient. It’s probably a combination of both but it does illustrate Mike Z. believes there is plenty of low hanging fruit available as he moves to give Nortel a structural make-over.
Standard & Poor’s analyst Kenneth Leon has maintained a “sell” recommendation on Nortel, suggesting CEO Mike Z.’s cost-cutting program may not be enough to generate higher financial returns. Leon’s decision comes in the wake of the latest saga in Nortel’s recovery efforts as the company’s insurers have agreed to cover pay $228.5 million toward former shareholder class-action lawsuits. Leon said while legal and regulatory risks are still around, he doesn’t believe it affects the company’s ability to operate. Instead, his sell recommendation is “based on the increased buying power of Nortel’s traditional fixed-line and wireless carrier customers, which we think will lead to lower pricing and narrower margins,” he said.
Now that Nortel has issued its last (??) restatement, everyone seems willing to be forgive and forget. The analysts are climbing back on board with research reports that talk about higher revenue and areas of strength, while CEO Mike Z. is working away to re-invent the company. Before anyone gets too excited, try to be somewhat pragmatic. I mean, this company’s track record over the past few years has been, at best, spotty. Maybe reading this column in the National Post is a good place to start. The National Post also has an analysis piece on the weird relationship between Nortel and its auditor, Deloitte. The Toronto Star also has a story on Nortel chief ethics officer Susan Shepard.
In the wake of Nortel’s plans to cough up $2.47-billion of cash and stock to settle two major class-action lawsuits, the company’s insurers have subsequently agreed to chip in another $228.5-million as a result of their liability coverage for Nortel officers and directors. The additional cash means Nortel will become the fourth-largest settlement of a U.S. class-action securities fraud sit, just behind the $3.2-billion paid by Cendant Corp.
Is Ericsson willing to spend $11-billion (not including a takeover premium) for Juniper Networks? Apparently, there is speculation the Swedish company is interesting in the IP router maker, even though it would an all-stock deal would be highly dulitive and complicated by Juniper’s partnerships with Lucent and Siemens, which account for 20% of its sales. If the deal actually materialized, you wonder if it would trigger the long-awaited consolidating within the telecom equipment market among the major players. Perhaps a Cisco-Nortel or a Nortel-Siemens or an Alcatel-Lucent?
Prudential Financial analyst Inder Singh has maintained his “overweight” rating on Nortel but reduced his 2005 and 2006 EPS estimates to $0.09 to $0.06 and from $0.20 to $0.18 respectively. He said Nortel’s preliminary 4Q 2005 revenue fell short of consensus while earnings were in line. His 12-month target price is $4.