Nortel’s M&A Edge?

Now for something completely different: a U.S. analyst believes Nortel’s inability/failure/reluctance to find a major dance partner a la Alcatel-Lucent or Ericsson-Siemens could be a competitive advantage – despite all the hue and cry that Nortel has been left without a dance partner. Confused? Well, Charter Equity Research analyst Edward Snyder said all the M&A action will leave telecom equipment customers confused over the next year, which will let Nortel steal market said. “A review of the Hewlett-Packard and Compaq merger suggests as much,” he said in a research report. “Low morale on layoffs and spending cuts hurt productivity and eased pressure on competitors. “We’re likely to see the same scenario played out in wireless systems, with turnover, both planned and unplanned, sapping productivity as employees worry more about employment than customers.” It’s an interesting thesis that may be valid in the short-term if Nortel’s competitors have to spend a lot of management time and energy working through consolidation efforts. But in the long-term, post-consolidation, it’s hard to see how Nortel can effectively compete unless it becomes a ultra-focused, ultra-lean supplier. This will mean exiting and/or selling business units, slashing R&D and cutting employees – something CEO Mike Zafirovski has yet to do or spell out yet. (Source for post: Toronto Star)

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3 Responses to “Nortel’s M&A Edge?”

  1. Joe Critic Says:

    Compitors merging is hardly good news for Nortel. This obviously forms larger competition.

    If it wasn’t such a strategic investment for these competitors, they wouldn’t be merging at all in this consolidating sector. Customers are merging too, to form a smaller market, so this consolidation is bracing for the future where few will be left standing as product prices and margins plummet.

    Nortel is still shrinking and losing money selling all their assts while increasing it’s liabilities and negative cashflow, losing marketshare, and with unreliable financials worst every time they count them/ remaining highly suspect with no guarantees as so many abruptly departed and a green team far from any dream team announces revisions and cutting product/staff/premises/etc… Better heads prevailed and they still lost money let alone now.

    This is why they must keep shrinking and sell off 25% of their business after selling manufacturing, headquarters, the last of their assets, etc… to survive longer as they finance themselves to zero. The traditional hype and forced exposure to overstating is as laughable as their non-negotiable management pay practices they fight tooth and nail to preserve.

    Not only is there no long awaited plan next week any more than repair of controls as they said, or cuts to the most expensive and least product R&D they boasted cutting for so long, they are directionless cutting product in response to BT’s exclusion of a $19B tender claiming they had to product, or beef revenues through BSNL/asset sales. While in turmoil and tanking they print their woes away through settlement shares that profit at the expense of a falling stock or print B3 rated bonds to meet creditors who increase collateralization for still overstating income post fraud and so many still there Owens called “difficult to find”. It is endless for this laughing stock.

    Lets put it this way, as they scrounge to sell what ever is left, i.e. 25% of their losing business (UMTS) for what, a billion, when 20 billion was wasted in the bubble days acquisitions, we can see how long they have with their declining cash, losing marketshares, outlook, and credibility with 1.8B debt to face in 2008 they can not collateralize but hope to have internal controls coincidentally repaired by then. Hopefully they will have internal controls coincidentally repaired by then to issue more high yeild bonds to keep paying themselves lotteries longer while still keeping bonuses they remain having no part of negotiating even after endless revisions.

    I can’t think of anything positive this company has going for it beyond its past sentiment glory days at a multiple of its size and global reach but even this is quickly deteriorating with no one wanting anything to do with them as they survive only to minimize further damage to alleviate another Enron or Worldcom.

    They should have been delisted on principal, mis-stating the restated restatement, extending their repair of controls from 2003 to 2008 (5 whopping years), never took on a green passed by CEO who defrauded his past employer form day one while joining a company struggling to regain credibility let alone paying a premium for it like PEC or Tasman, held the last minute changed numbers suspect that were restated anyway and worst every time they counted them with ongoing revisions from 3.5B to 5B, etc… it is endless…

    Hardly a stock I’d bet on surviving this future IP unless it just keeps selling off anything it can sell to survive and keep paying themselves just that much longer under safe harbour… just as thsi resilient hard to flush laughing stock is doing… as the creditors or shareholders do not appreciate their ongoing sense of humour

  2. Ross Says:

    The suggestion that Nortel will somehow benefit from the mergers others are involved in, and come out on top because of the advantages of higher morale and productivity is laughable! Clearly anyone making this claims/suggestions is not familiar with the situation.

    From all reports, morale in Nortel is at an all time low 9-10 months after Mikey Z took over. I know it is hard to imagine, but insiders consistently make this claim. They believe the lack of clear direction, and the increased cronyism has had a very negative impact since Mikey took over.

  3. Moneytalks Says:

    Cronyism indeed seems to separate the real employee from the new execs. There are many initiatives internally that appear to be just wasting human resources and time not addressing the real problems – excess bureacracy and over engineered processes at Nortel.

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