According to the Wall St. Journal (hat tip to Seeking Alpha), Sprint has rounded out its WiMax suppliers by selecting Nokia ahead of Alcatel-Lucent and Nortel. Nokia will join Motorola and Samsung Electronics to supply technology for Sprint’s $3-billion WiMax network over the next two years. This can’t be good news for Nortel, which has pinned a lot of its future growth on WiMax. That said, Sprint is just a single contract so it’s not like Nortel’s WiMax dreams have evaporated (much like Nortel now appears to be back in BT’s good books after missing out on the 21CN contract). But it would have been a solid signal to the market if Sprint had tapped Nortel.
Archive for December, 2006
Nortel moved a major step forward in finally putting its accounting scandal behind it after two U.S. judges approved a $2.25-billion class-action lawsuit settlement. U.S. District Judge Loretta Preska said the global settlement reached earlier this year is “fair, reasonable and adequate” to compensate people or entities who bought common stock or sold options on Nortel stock between April 24, 2003, and April 27, 2004. U.S. District Judge Richard Berman said a similar deal reached on behalf of as many as 1.4 million Nortel investors between Oct. 24, 2000, and Feb. 15, 2001, is fair and adequate. The lawsuits involve allegations that Nortel executives, including ex-CEO Frank Dunn, cooked the books to trigger lucrative bonus plans.
Blogging Stocks questions whether Nortel can stay independent given it is trading at a market cap to sales ratio lower than Alcatel-Lucent and Motorola, and the lacklustre performance of Nortel shares recently. “There are several companies that might find Nortel an attractive acquisition. The list would be lead by Motorola, Cisco Systems Inc., and Alcatel-Lucent,” opines Douglas A. McIntyre, a partner with 24/7 Wall St.
Whoever is doing Nortel’s PR should be getting a huge year-end bonus. First, a glowing story in Forbes; then, another one in Barron’s; and now, a “Has Nortel Turned Around?” story in Forbes. This media bonanza featuring CEO Mike Zafirovski is a far cry from his predecessors, Frank Dunn and Bill Owens. Dunn had an open disdain for the media, and rarely provided interviews, while Owens was talked the talk but couldn’t walk the walk. In terms of what Zafirovski told Forbes, the most intriguing was a question about Nortel’s shopping list. His leading priority is enterprise, particularly data – although there was no insight into how big of a deal Nortel is prepared to make.
Nortel received an early holiday gift after Ron Alepian agreed to come over from BCE to become the telecom equipment maker’s v.p. of global communications. He replaces Bill Durling, who replaced, Marian MacKenzie, who replaced…Well, you get the picture. Alepian will be responsible for the “strategy and execution for global public relations, employee and executive communications, and industry analyst relations”. Before taking on the Nortel assignment, he was senior director, corporate communications with Bell Canada/BCE Inc. I hope you know what you’re getting yourself in to, Mr. Alepian…:)
Anyone who was hoping Nortel would snap up Redback Networks to expand its router business is going to have to think about a new strategy after Ericsson made a $2.1-billion offer for Redback. The cash offer of $25 a share is a modest premium of 18% over Redback’s closing price yesterday, and now puts Ericsson in head-to-head competition with Cisco. “The router business was an obvious gap in their offering,” said Joergen Vrenning, a Stockholm-based fund manager at Catella Capital told Bloomberg. “It is now a pretty big player in this field too. If anyone is able to bring these products to the market, it’s Ericsson.”
Obviously, Nortel doesn’t have the cash to make an all-cash offer of this size so it’s been forced to make small deals such as the $99-million purchase of Tasman Networks about a year ago. One thing about the Ericsson-Redback deal that is interesting is how it illustrates how well Ericsson has been restructured in recent years after it struggled when the telecom boom ended.
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It’s interesting to see the pragmatic – if somewhat unenthusiastic reaction – among analyst to Nortel’s $2-billion deal with Verizon Wireless, which was announced yesterday. It’s almost like no one is willing to jump back on the bandwagon even though Nortel appears to have gained some momentum with a key customer. A good example is Sanford C. Bernstein analyst Paul Sagawa, who told the Globe & Mail that Nortel will be getting about $400-million of business year from Verizon, which is close to what it’s already been selling to the largest wireless carrier in the U.S. “Nortel’s got some 20-per-cent share of the Verizon network, and they’re going to [continue to] get that unless they do something really egregious to lose it,” he said. “Basically it’s an expansion and upgrade to an installed base that’s already there.” Nortel shares climbed 3.1%, or 75 cents, yesterday to $24.50 in New York.
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Not sure quite to make of the news that Nortel has won a five-year, $2-billion contract to provide equipment and services to Verizon Wireless. From previous experiences dealing with Nortel and large contracts, I’m reluctant to trumpet the fact Nortel has won a $2-billion contract because who really knows if $2-billion of business will actually materialize over the next five years given technology changes, strategy changes and consumer behavior changes. Nevertheless, there has to be some good news from the fact Verizon will be using additional CDMA2000 radio base stations, switching, IP platforms, optical networking solutions and related equipment from Nortel.
“This contract confirms Nortel’s leadership in supplying innovative CDMA mobile broadband technologies and driving advanced communication services,” said Nortel’s Richard Lowe. “It’s our long term partners that know us best, so we’re particularly proud when an industry leader like Verizon Wireless asks us to be part of their team for another five years.” Of course, it’s fine to be the leader in CDMA other than the fact CDMA’s on the decline while GSM is on the rise but that’s another story for another day.
In mid-day trading, Nortel is up 58 cents to $24.33. A Reuter story on the deal can be found here.
More thoughts: I knew there was a reason this story sounded eerily familar. In January 2004, Nortel signed a five-year deal estimated to be worth $5-billion with Verizon Communications to migrate the carrier’s local and long-distance networks to Internet-based technology from older circuit-based systems. The agreement made Nortel the exclusive provider of Verizon’s local and long-distance class four and class five switches, and Voice-over-Internet Protocol and multi-media services equipment over the next 18 months. I’d be very surprised if Nortel will collect $5-billion from this agreement.
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So let’s have some holiday fun and put together a 2007 wish list for Nortel CEO Mike Zafirovski. Let’s me start things off by suggesting Mike Z. could like to see the small and medium size business market really embrace the BCM 50 so it becomes a $1-billion a year business. Anyone else want to step up?
Eastman Kodak has extended its U.S. voice network management deal for another three years with Nortel. This involves Kodak’s U.S. network of PBXs and telephone services through 2008, as well as an upgrade of the existing Meridian switch to an IP-enabled Communication Server 2100.
For an interview and comprehensive read on where Nortel is heading strategically, check out Business Line. The story includes a number of graphics that provide some good insight into where Nortel is headed and some of the key trends within the high-tech/telecom industry.
Network World’s Jim Duffy sat down for an interview with Nortel CEO MIke Zafirovski. Duffy wasted no time putting Zafirovski on the spot by asking him why Cisco should worry about Nortel. Here’s the answer:
“Cisco is a great company; I have lots of respect for them. Most people would say they are a very powerful sales and marketing machine, not necessarily an innovator. [But Nortel] is a very passionate company that really wants to make a difference, to be a great alternative. A company that has led in most communications, including the evolutions on IP. We are very committed to lead again and we believe we are bringing our innovation back to a core competency [with] smarter commercialization of that technology. And most important, a company that’s going to make business simple and more flexible than any other company out there.”
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After being unceremoniously excluded from BT’s $19-billion next-generation network project a couple of years ago, it looks like Nortel could be getting back in BT’s good books. The two companies have signed a new, three-year deal with will see Nortel help BT provide its business customers with VoIP, multi-media, instant messaging and mobile communications services. “BT’s customers are turning to convergence to improve the efficiency and flexibility of their businesses,” said Andy Green, BT Global Services’ CEO. “To support them we must ensure that we have the right partners in place with leading-edge portfolios, the highest levels of commitment and a shared vision.”
Perhaps what’s most intriguing about the press release it is it suggests “the signing of the new agreement between BT and Nortel is part of an extensive review by BT of its vendor partnership strategy.” I wonder if this statement just involves mobile, VoIP, multi-media and instant messaging technology or whether it suggests a broader review.
For more on this news, check out TMCnet.
Export Development Canada’s support of Nortel is alive and well amid news Nortel has amended its master facility agreement to extend the maturity date of the US$750-million facility for an additional year to December 31, 2008. This includes the existing US$300 million of committed support for performance bonds and similar instruments.