Nortel has raided the management ranks of Coca-Cola Co. to hire Ellen Bovarnick to oversee its SixSigma quality standards program, as well as manage customer satisfaction and process improvements. Bovarnick, who has been VP of business process excellence with Coca-Cola, will report to Joe Hackney, Nortel’s senior vice president of global operations and quality. (Source: Triangle Business Journal)
Archive for October, 2006
Nortel CEO Mike Zafirovski has been named a finalist in Light Reading’s Leading Lights Awards in the public companies leadership category. The competition includces NeuStar CTO Mark Soster, JDS Uniphase CEO Kevin Kennedy, Ericsson CEO Carl-Henric Svanberg, Verizon CTO Mark Wegleitner and Cisco Senior VP Mike Volpi. The winners will be announced November 15 at Heavy Reading’s Links 2006 Executive Summit Gala Dinner in Santa Barbara, Ca. The Leading Lights Awards recognize “leading companies and their executives for their outstanding achievements in the telecom industry”.
Nortel chief technology officer John Roese sure ain’t shy these days. He seems to popping up in the news on a regular basis, weighing in on Wi-Max one day and how YouTube could break the Internet the next. He recently sat down for an interview with CNet in which he talked about Wi-Max, 4G, Nortel’s prospects in the enterprise market, and consolidation in the telecom equipment market. A particularly interesting quote is Roese’s assertion “Nortel is a great company with great potential, but it was misdirected for the past five years.” Let’s break down this comment. First, Nortel is not a great company right now. It has some great technology and many smart people but it’s not a runaway leader in any sector so describing it as “great” isn’t accurate – although it is definitely a glass half-full view of the world. Second, Nortel has “great potential”. Well, every telecom equipment player has potential but the proof is in the pudding, and 2007 will be a crucial year for Nortel to prove it can execute on its strategic initiatives. Third, Nortel was “misdirected for the past five years”. That’s interesting because CEO Mike Zafirovski has been at helm for the past year. So, let’s give Roese the benefit of the doubt and assume he meant Nortel was misdirected from 2000 to 2005. This covers the John Roth, Frank Dunn and Bill Owens CEO eras. On this point, Roese makes a good point. Roth got caught up in the euphoria the telecom boom and was caught with his pants down when the market suddenly melted down – shortly after he boasted about Nortel driving towards $40-billion in annual sales amid strong market share gains. Frank Dunn was unsuited for the job and was fired with cause amid allegations he was part of an accounting scandal that triggered lucrative bonuses for senior executives. Bill Owens was unfortunatley unqualified to lead Nortel, although he did provide the company with some much-needed stability after Dunn was fired. Owens may have been a terrific U.S. Admiral but he wasn’t a world-class telecom CEO, and he made some costly strategic mistakes (e.g. driving the company to enter into a money-losing contract in India with BSNL, refusing to step aside and let COO Gary Daichendt run the show, etc.) Getting back to Roese, it’s probably time for Nortel to stop looking back at what happened. The company’s it what it is these days for better or worse. A better approach would be to look ahead and focus on a challenging competitive landscape.
So let’s see if Nortel can walk the walk in addition to talking the talk. The company will post it third-quarter results on Nov. 7 and hold a conference call (teleconference/audio Webcast) from 8 a.m. to 9 a.m. featuring CEO Mike Zafirovski and CFO Peter Currie. Here are the details: North America callers (888-211-4395) international callers (416-620-2417), while the audiocast can be found here.
Another day, another technology with lots of potential for Nortel. Today, it’s multiple input multiple output (MIMO) technology. Nortel believes it has the ability to double the number of subscribers that a cell site can support. Nortel is confident MIMO “creates a technological disruption that offers revolutionary improvement in wireless network capacity and provides a clear path to 4G Mobile Broadband” (that’s according to John Hoadley, Nortel’s chief technology officer, Mobility and Converged Core Networks. Source: iTWire)
There are lots of fascinating things about Nortel but most recently, it has been interesting to see how the company has unleased an ambitious public relations campaign featuring many of its senior executives. Whether it’s chief technology officer John Roese talking about the need for more bandwidth, or chief strategy officer George Riedel speculating about acquisitions or CEO Mike Zafirovski speaking yesterday about how “the stars are aligning for Nortel to come back very strong”, there’s a definite theme happening. This approach compares with Zafirovski’s predecessors, Bill Owens, who was clearly uncomfortable talking to the high-tech media, and Frank Dunn, who found his distain for the media difficult to hide. With most of the company’s problem (accounting scandal, class-action lawsuits, layoffs, etc.) now behind it, clearly Nortel believes the time is right to start talking the talking (we’ll see if the company can walk the walk with better results). Zafirovski, who has been a keynote machine recently, was in Montreal yesterday offering some optimism about the future. “I do believe as 2006 winds down, this will show a nice improvement over 2005,” he said, adding he’s looking to the growth of video over the Internet to provide new opportunities.
In news that can’t be music to the ears of telecom equipment vendors such as Nortel, Gartner said $100-billion will be wasted on network services and products over the next five years. According to ComputerWorld, Gartner analysts Mark Fabbi said network executives should focus on spending plans to meet their needs over the next two years because rather than buy more than they need. He said, for example, WAN optimization tools should be implemented to make network traffic more efficient rather than purchase more bandwidth – which goes contrary to statements made last year by Nortel CTO John Roese, who argued the growth of Internet traffic through services such as video will see a boom in capacity. Fabbi contends WAN optimisation tools can reduce traffic by 6% to 80%, offsetting a 35% growth in bandwidth needs. His colleague, Bob Hafner, poured fuel on the fire by arguing that companies should avoid spending money on such things as IP phones with large display screens. Instead, he said they should purchase less expensive phones, and use the $150 to $350 savings on unified communication services to make employees more productive. He’s also big on soft phones (software) rather than expensive desk phones. While equipment makers will no doubt be taken aback by the Gartner view of the world, Andy Abramson believes there is a lot of positive news for Web 2.0 service providers such as Skype, PhoneGnome and iotum that leverage high-speed networks. Meanwhile, GigaOm believes there will be a resurgence in video conferencing next year, highlighted by Microsoft’s release of a product called RoundTable.
Just when you thought Nortel was only focused on Wi-Max, it comes out with an ambitious plan to tackle the Wi-Fi market as well. In a press release, the company said it is “increasing its investments” (didn’t provide details on how many dollars are involved) by creating a new municipal Wi-Fi lab, launching a new P.R. campaign for its Wi-Fi technology, and aligning itself with a handful of industry players. This group (none of whom I’ve ever heard about) includes, 121Media Inc., Accela Inc., Aptilo Networks, Blue Vector Systems, NetMotion Wireless, Pronto Networks and smarTVideo Technologies. Nortel said this alliance will allow it to offer broadband wireless services such as in-vehicle communication systems, automated meter reading, digital video surveillance, asset or fleet tracking, subscriber management and mobile television. In theory, the focus on all these wireless services sounds encouraging but how many of these partners are among the leaders in their respective service markets? It’s one thing for Nortel to get everyone excited about a technology – be it Wi-Max, Wi-Fi or metro Ethernet – it’s quite another to be a viable player. If Nortel announced an an alliance with Ottawa-based Belair Networks, which provides base stations for muni Wi-Fi networks, that would be an interesting partnership. Or if Nortel did a deal with AirIQ, which is a player in the fleet tracking market, there would be cause for enthusiasm. Nortel has good intentions, the question is whether good intentions can lead to good results.
Nortel CTO John Roese, who seems to have been in the news a lot recently, said the growth of video on the Web will inevitably cause carriers to increase network capacity as the glut of bandwidth built during the last telecom boom starts to evaporate. In an interview with Reuters, Roese said the metro ethernet market will be particularly strong as carriers look to expand the last mile to handle online video, music, games and TV. “That’s our underlying fear,” he said. “If the industry cannot keep up with the demand because we kind of take it for granted after the buildout in the 2000 timeframe, if we ever hit a wall, the impact on global economies, the impact on innovation is just profound.” The metro ethernet “boom” should also be good news for Ottawa-based Meriton Networks, which has raised more than C$100-million of venture capital so far.
Once again, Nortel topped Canada’s R&D spending list with $2.25-billion in 2005 even though this was a 12% drop from 2004, according to Research Infosource Inc. This placed it well ahead Bell Canada, which was second with $1.74-billion. Overall, the 100 biggest companies spent $12-billion, a 4.9% increase. “The R&D outlook is optimistic,” Ron Freeman, CEO with Research Infosource. “Spending has increased at over two-thirds of the top 100 companies, and in many instances, growth in R&D investments, exceeds revenue growth.” Not that it’s relevant to Nortel or the telecom sector but Microsoft plans to spend $7.5-billion on R&D this year, $1.3-billion more than expectations.
In yet another component of Nortel’s cost-cutting program, it unveiled the details of a new call centre being established in Mexico City. The $38-million facility (over five years) will employ 300 people, who will focus on providing services to companies in North America, Europe, Caribbean and Latin America. For more Nortel, check out the Ottawa Business Journal’s interview with chief strategy officer George Riedel.
The Ottawa Citizen has a story looking at the approach that Nortel’s senior management team is taking towards the company’s turnaround. The article features how chief technology officer John Roese was recruited and why he decided to join Nortel after less than a year at his last job.
The Bell Centre (where the Montreal Canadiens play hockey) is turning to Nortel for a wireless communications system. Everything from scanning tickets at the door and vendor sales to VoIP and Internet access for 300 journalists will travel over a high-speed wireless network powered by Nortel’s LAN and WLAN technology.
CBC.com did an investment feature on Nortel, focusing on who’s trading the stock (mostly retail investors, it appears) and the stock’s outlook. The most bearish comments came from Ross Healy, president and CEO with Strategic Analysis Corp. and a long-time Nortel watcher. Healy suggests Nortel’s fair market value is $1.33 a share and he describes the company as a “catastrophe in waiting”. “I look at the long, long, long-term trading pattern of Nortel for the past three decades, and if I had to make guess as to where the stock might bottom in a bearish market I would say that it could double-bottom at its 2002 low,” he said. Healy may be right but Nortel’s troubles (or, conversely, its prospects) may hinge more on market conditions and the state of the company’s technology portfolio, which has been hampered by the company’s accounting woes in recent years, than the current management team. In conversations with many of the senior executive that CEO Mike Zafirovski has recruited over the past year, the common theme is optimism and sincerity. People such as George Riedel and Dietmar Wendt really want to see Nortel do well for all the right reasons. Granted, they probably have sweet incentive packages that will reward them for success but investors may not care too much if Nortel can regain some of its momentum. Of course, Zafirovski and his management team have many, many challenges to overcome. In particular, they still need to figure out where the company is focused strategically. There’s a lot of talk about Wi-Max, 4G and IP-TV but few people look at Nortel as a market leader in any of those areas. Truth be told, 2007 looks to be a make or break year for Nortel given investors – and customers – are looking for strategic execution now that most of the corporate baggage (accounting scandal, class-action lawsuits, etc.) has been addressed. Update: In the name of fairness, Scotia Scotia has a $2.80 12-month target price for Nortel