Archive for November, 2006

If Nortel Executes…..

November 30, 2006

TD Securities analyst Chris Umiastowski has issued a research report after spending some time thinking about Nortel’s investor day a couple of weeks ago, and talking with a number of industry contacts. He clearly came away impressed with management.

“We figure that if Nortel executes smoothly, the stock will likely double. To us, that justifies spending a lot of time exploring the details behind the plan. Not wanting to be limited to talking to management, we interviewed many of our industry contacts and found that, while Nortel has many “plans and projects” underway, we were not yet able to find evidence of tangible results. Inside the report, we present several examples of our findings that leave us feeling it’s too soon to “drink the Kool-Aid”. We can’t yet draw conclusions except to say that this business transformation plan is key to Nortel’s stock price. As for us, we will have to keep digging to gather more evidence. ”

Umiastowski is maintaining his “hold” rating on Nortel with a 12-month stock price target (pre-consolidation) of US$2.50.

No 3G Pot of Gold for Western Suppliers in China

November 29, 2006

The boom in sales that telecom equipment makers are expecting from doing business in China may not materialize, according to the Wall St. Journal. With $10-billion to $30-million of 3G wireless sales poised to happen over the next four to five years, the business may go to Chinese suppliers such as ZTE and Huawei rather than Nortel, Lucent, Motorola or Ericsson. Here’s the story:

Bad news may be in store for Western telecommunications-equipment makers hoping to cash in on China’s expected $10 billion to $30 billion investment in new third-generation wireless networks over the next four to five years.
Manufacturers, including Motorola Inc., Lucent Technologies Inc., Nortel Networks Corp. and Sweden-based Telefon AB L.M. Ericsson, that have long dominated the Chinese market for wireless network equipment are faced with the possibility of losing sizable market share.
China is expected to try to give its own equipment makers a boost by launching its third-generation, or 3G, networks with its own technology standard, called TD-SCDMA, along with other standards. In the past 10 years, Chinese companies Huawei Technologies Co. and ZTE Corp. have been expanding aggressively in the global market and are ready to compete for 3G equipment contracts at home.
[Chart]

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Nortel’s IMS Strategy

November 29, 2006

If you’ve ever wanted to know more about Nortel’s IMS strategy, Rich Tehrani had a chat recently with Eric Bezille, Nortel’s IMS product marketing manager for Europe and Asia.

Nortel in Iraq

November 28, 2006

It took a few days but the Globe & Mail has finally picked up on Nortel’s $20-million contract to build a fiber-optic network in Iraq.

Ericsson, Nokia Win T-Mobile Contract

November 27, 2006

Ericsson and Nokia have won a contract to supply equipment for T-Mobile’s 3G network in the U.S. The contract comes on the heels of announcement by parent, Deutsche Telekom, that it would spend$2.64 billion on a U.S. 3G network. According to an RBC Capital Markets report (an excerpt was posted by GigaOm), “Ericsson may be gaining share from Alcatel/Lucent and Nokia/Siemens, both of whom are mired in major integration efforts. . . Nortel is losing share largely in part due to it abandoned UMTS plans.” A Light Reading story can be found here.

My New Nortel Dream

November 27, 2006

Now that I’m no longer a business journalist, I wonder whether there’s any chance of begin the first blogger to formally interview Nortel CEO Mike Zafirovski? After all, I write the only blog (as far as i can tell) specifically devoted to all things Nortel so you figure they could treat me like a quasi-journalist, right? I’ve already put in a request for an interview so let’s see if Mike Z. bites.

Nortel’s Takeover Prospects?

November 26, 2006

The Toronto Star has a short story looking at possible takeover candidates within corporate Canada. Not surprisingly, Nortel makes the list. Here’s the Star’s take: Post-telecom bust, the telecom-equipment sector is consolidating. Weak sister Nortel matches up nicely as a North America partner to European peers Telefon AB L.M. Ericsson of Sweden, Germany’s Siemens AG and Alcatel SA of France”. Thoughts?

The WSJ Story

November 24, 2006

For those of you who don’t have a WSJ subscription, here’s the story on Nortel that appeared in yesterday’s newspaper.

TORONTO — As Nortel Networks Corp. reported its seventh loss in the past nine quarters, Chief Executive Mike Zafirovski mapped out a plan to get the company’s bottom line back in the black.
Mr. Zafirovski says the telecommunications-equipment vendor will slash spending on materials, cut research-and-development spending to around 15% of revenue from about 18%, and halve key administrative costs. The company moved into a scaled-down Toronto headquarters in late September. Nortel says cost-cutting will save some $1.5 billion a year by 2008.
[Mike Zafirovski]
The company also expects new product offerings to boost profit margins. Mr. Zafirovski last week told reporters that Nortel is on a “path to improved profitability.”
But it remains a rocky road. Earlier this month Nortel reported a third-quarter loss of $99 million, even though revenue climbed 17% to $2.96 billion. The results triggered an 11% drop in the company’s long-slumping stock price.
The telecom-equipment market suffers from “too many vendors and too little business,” says Ping Zhao, a senior analyst with research firm CreditSights. “The pricing environment is not getting better,” she says, because telecom carriers expect revenue-hungry vendors to reduce prices to secure business.
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Nortel in the WSJ Spotlight

November 23, 2006

Nortel’s “recovery” has caught the attention of the Wall St. Journal, which published a story today (subscription needed). In the story, CEO Mike Zafirovski said the company’s financial rebound will come from reducing costs by $1.5-billion by 2008 and a boost in profit margins from new product offerings.

Wanted: More Bandwidth

November 22, 2006

Forbes has a story looking at how the growing amount of Internet traffic (video, gaming, data, etc.) is forcing carriers to expand their networks, and provide some sweet business to equipment suppliers such as Nortel, Cisco and Alcatel. Infonetics projects that major carriers will spend $203.1-billion on capital expenditures this year, up 5% from last year – much of it focused on the “last mile” to serve the needs of residential and business users as opposed to long-haul networks. Infonetics expects sales of metro Ethernet equipment will triple from about $5-billion in 2005 to more than $15-billion in 2009. Nortel CTO John Roese, who’s enjoying his 15 minutes of fame, told Forbes that “It’s surprising to [carriers] that we’re starting to see bandwidth growth in a way that we maybe didn’t predict.”

Why Zafirovski Sold Some Shares

November 21, 2006

The mystery – at least to me – about why Nortel CEO Mike Zafirovski sold some shares earlier this month has been solved. According to the company, Mike Z. was given 2.265 million restricted stock units on Nov. 15, 2005 in accordance to the Nortel 2005 Stock Incentive Plan. The RSUs vest in five equal annual installments beginning on Nov. 15, 2006, and are settled in Nortel common shares upon vesting. The shares that Mike Z. sold are required by Nortel under the plan in order to pay withholding taxes at the time of the vesting of the RSUs. Of course, some of you already knew that but now it’s official.

Natural Convergence Raises $10M

November 21, 2006

According to the Ottawa Citizen, Natural Convergence Inc. has raised $10-million in private equity to expand its VoIP business, which is driven by its Silhouette software, a hosted VoIP software application designed for service providers. Natural Convergence’s roots go back to Nortel’s former Extreme Voice division. Natural Convergence expects to turn profitable next year.

He’s Here, He’s There, He’s Everywhere

November 20, 2006

 Upload It News Zroese652John Roese, Nortel’s chief technology officer, must have passed his media training with flying colors because he’s everywhere these days. His latest gig is a Q&A with ITBusiness.ca where he explains the reason he joined Nortel after only eight months at his previous job was its scale in six businesses: wireless, wireline, carrier, enterprise, applications and infrastructure. “Those are the characteristics of a next-generation communication provider,” he says. “If you don’t have all six of those, you better find a way to get ‘em, because without them, you are going have a disadvantage in solving problems such as making the extended enterprise work.” It’s an interesting statement because some analysts have criticized Nortel recently for trying to be all things to all people (even after the sale of its UMTS and blade-server units).

Alcatel-Lucent Merger on Watch

November 20, 2006

Light Reading reports that Alcatel and Lucent have agreed to have their merger (well, it’s actually Alcatel buying Lucent) open for further review by the Committee on Foreign Investment in the United States after deal is completed as part of a security agreement reached with a variety of U.S. government agencies. The "merger" is expected to be completed Nov. 30. Tags: ,

Nortel Wins $20M Deal in Iraq

November 20, 2006

Nortel is getting involved in the reconstruction of Iraq’s infrastructure with a $20-million contract to build a new, 5,000-kilometer fibre-optic network for Iraq Telecommunications & Post Corp. The network, which will deliver data, video and multi-media services, will be linked an another network built by Nortel in 2004 that runs between Basra and Baghdad. "This national project is vitally important to the many telecommunications projects underway that will help rebuild the capabilities of the Iraqi society and economy," said Mohamed Allawi, Iraq’s minister of communications, in a press release. Tags: , ,