Nortel’s New PR Hire

February 21, 2007

Rumours have it my friend, Mohammed Nakhooda, has left Bell Canada to become the newest flack – er, I mean PR specialist – with Nortel. Maybe this will give me a better shot at getting an interview with Mike Zafirovski! By the way, Mr. Z: nice hire.

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Nortel Gets Close to Calix

February 20, 2007

As part of its strategic focus on IP-TV, Nortel has entered into a joint marketing agreement with Calix. (Nortel has had a strategic alliance with Calix). Here’s LightReading’s take on the news:
Like Ericsson, Nortel knows it needs a strong access infrastructure story if it is to be a significant player in the IPTV market, and will likely need to do more if it is to meet its own competitive criteria: CEO Mike Zafirovski is only interested in competing in markets where Nortel can be one of the top two players, or command a 20 percent market share.

Other than with Calix, Nortel hasn’t had much luck with its broadband access partnerships since it decided to abandon the DSL market. Its relationship with ECI Telecom Ltd. (Nasdaq: ECIL – message board) ended in tears, while a partnership with Chinese vendor Huawei Technologies Co. Ltd. broke down before it even got going. (See Nortel, Huawei Kill JV, ECI: Nortel Didn’t Deliver, and Nortel CEO: We Blew It on DSL.)

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So, Will Nortel Cut R&D Costs or Not?

February 20, 2007

The Globe and Mail has an article today looking at Nortel’s R&D operations/campus in Ottawa, which consist of 4,000 people and two Tim Horton’s coffee shops. The story is based on an interview with CTO John Roese (check out his blog), who talks about how Nortel’s need to better focused and more efficient when it comes to R&D, which means reducing costs. It’s unclear, however, whether cost-reductions involve things such as more efficient procurement, or whether it means the number of R&D employees around the world will be reduced.

Nortel CEO Mike Zafirovski has talked about Nortel maintaining its R&D spending at about 15% of total revenue  but the company has also talked about the company being focused and not wasting money on skunk-work projects. And as much as everyone likes to talk about Nortel’s heritage as an innovator, the reality is Nortel is developing and selling new and different projects through joint ventures and partnerships with companies such as IBM, Microsoft and LG. This may mean internal R&D – while still important – can take on a different, more focused role on key technologies such as IP-TV and WiMax.

Nortel Shares on the Rise

February 17, 2007

With little fanfare, Nortel shares have started to gain some momentum over the past month. The stock closed yesterday at $31.62, a 16% climb in the past month. It’s not like analysts have been falling over themselves pushing the stock, although people such as RBC’s Mark Sue are getting a bit more positive.

RBC Raises Target Price

February 16, 2007

According to Seeking Alpha, RBC Capital analyst Mark Sue has increased his price target to $32 from $28 based on his belief Nortel is “slowly starting to turn the corner,” and that the company “has worked steadily to increase its relevance with major customers.” Sue rates Nortel as a “sector perform”.

What’s Nortel?

February 16, 2007

Here’s a concept that I’ve been trying to get my head around recently: what’s Nortel all about these days? Before anyone goes “huh?”, what I mean is what’s Nortel raison d’etre? When you think of Nortel, you think of what? For example, Ericsson is all about wireless communications; Cisco is about routers, switches and, increasingly, home networking equipment; Nokia and Motorola are about handsets. So what’s Nortel about these days? Is it VoIP? Is it IP-TV? Is it Wi-Max? Is it CDMA? Is it enterprise? Is Nortel still trying to be all things to all people?

I’m sure Nortel CEO Mike Zafirovski has a clear idea about how he wants to position the company within the telecom landscape but even after 18 months at the helm, Nortel still lacks identity. “We are Nortel, we’re good at xxxx!” I wonder if this is an issue for customers, particularly customers looking for to buy next-generation equipment such as Wi-Max or IP-TV? If anyone provide a definitive definition of the new Nortel, bring it on.

Is 3G Dead?

February 15, 2007

Nortel CEO Mike Zafirovski said 3G isn’t up to the job of providing a fast enough network to meet the needs of broadband customers. At the 3GSM conference in Barcelona, Zafirovski said HSDPA (a technology that Nortel just happens to sell) is the way to go because it has the potential to have speeds of 14 Mbit/s, compared with 1 Mbit/s for 3G. 3G was also dissed by Simon Beresford-Wylie, CEO Designate of Nokia Siemens Networks, who was also on stage. Of course, 3G is yesterday’s news for telecom equipment makers who need the carriers to start buying new, higher-margin products. I mean, 3G is so yesterday, 4G is today!

Source: Lightreading.

Should Motorola Buy NT?

February 14, 2007

24/7 Wall St.’s Douglas McIntyre writes that Motorola may want to take a run at buying Nortel. With $11-billion of cash, he believes this Motorola could benefit from Nortel’s turnaround and its exposure to Wi-Max. “Nortel’s market cap is $13 billion. Perhaps Motorola could put all its cash to good use,” he concludes.
Thoughts?

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“Nortel is Finally Back”

February 14, 2007

One thing about Nortel CEO Mike Zafirovski, he knows how to talk the talk. In an interview with MarketWatch, Zafirovski proclaimed that Nortel is “finally back’ as it puts its financial books in order and works on putting an SEC investigation behind it. “We just want to be a normal company,” he said, which sounds like a wish as much as a statement.

Some other interesting quotes from the interview, include his belief that Nortel can only rebound if it’s got the right cost structure. “We have a very aggressive business transformation process. Unless you have the right cost structure, you can never control your destiny.”

and that Nortel can start to regain market share again with a new management team in place (not withstanding the fact the company needs a new CFO to replace Peter Currie)
“First who, then what,” he said. “We’re not winning yet, but we have people on board with a track record of winning”.

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Nortel’s 4G Campaign

February 13, 2007

Roese
I’m always fascinating with corporate marketing spin jobs where companies blatantly attempt to position themselves to take advantage of emerging markets with fertile growth potential. For Nortel, these campaigns have gone back forth between 4G, IP-TV and VoIP in recent months.

These days, 4G has become the cat’s meow. In preparation for the 3GSM conference, Nortel put out a press release touting the “4G Lifestyle”. Today, an interview done by ZDNet’s Tom Foremski with Nortel CTO John Roese is another part of the 4G “message” that Nortel wants to deliver to the world. In the interview, Roese said 4G is a radical new business strategy in which Nortel is betting carriers will want to offer higher-speed wireless networks so they can deliver a better Web experience (video, IP-TV) to consumers.

“We realized that for Nortel to be successful, we had to get totally behind 4G,” Roese said. “That’s why we have been selling our older lines of business. We call it our burn the boats strategy. It is what Alexander the Great did when his army crossed into Asia, there is no going back.”

Either Roese is showing off his historical knowledge by citing Alexander the Great, and/or he’s doing some serious playing up to Nortel CEO Mike Zafirovski, who just happens to be Macedonian – just like Alexander the Great. Either way, Nortel has put a lot of chips behind a market where it’s not seen as a leading or dominant player. It’s a huge strategic gamble but perhaps one Nortel has no choice to make if it wants to avoid becoming a second-tier player in the telecom equipment market.

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It’s a Lifestyle; Not Technology

February 12, 2007

At the upcoming 3GSM conference, Nortel promises to “challenge the industry to deliver the 4G “Lifestyle” by rolling out next-generation, high-speed wireless technologies that can deliver services such as video and high-definition TV broadcasting. When did 4G become a lifestyle? How come no one told me? If it means getting a fast, user-friendly Web access while on the road, I’m all for that. Nortel plans to walk the walk in addition to talking the talking about the 4G Lifestyle (4GL?) at 3GSM by demonstrating the wireless industry “first live end-to-end MIMO-powered WiMAX solution, using advanced innovative antenna technology to deliver high-bandwidth applications, such as real-time video, over personal mobile devices”.

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So What Next, Mr. Z.?

February 9, 2007

In the wake of Nortel’s decision to eliminate 2,900 employees over the next two years to save $400-million in operating costs, one question that still lingers is what Nortel wants to be when it “grows up”. Despite some asset sales (the UMTS business to Alcatel, the sale of the blade server division to U.S. investment bankers, etc.), Nortel is still a company with diverse operations, although probably not the all things to all people supplier that ex-CEO Frank Dunn was so keen on nurturing.

So, what does current CEO Mike Zafirovski do now that it appears the foundation work is close to be finalized? Does he make an acquisition? If so, how big does/can he go? Does Nortel stay small and strategic, and make $100-million acquisitions akin to the deal for Tasman Networks? Or does it go big to establish a leading role in the IP-TV or enterprise markets?

During a speech in Ottawa yesterday, Zafirovski talked about his six-point program, which features “profitable growth”. The sixth guideline, he said, is Nortel wants to target major markets. “I’m not interested in just small skunk works,” he told the Ottawa Citizen. Interesting.

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Nortel’s IP-TV Targets?

February 8, 2007

VC Ratings has a post looking at Nortel’s potential M&A targets in the IP-TV market. It includes Minerva, Kasenna, Irdeto Access and Broadstream Communications.

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Q4 Looks Good

February 7, 2007

While cutting 2,900 jobs is far from positive news, Nortel also announced preliminary fourth-quarter results that surpassed the expectations of UBS Securities. Nortel said revenue will be $3.26-billion while gross margins will be about 40% – ahead of the $3.1-billion and 38.5% expected by UBS. In a research note, UBS analyst Robert Dennison said strength in CDMA and LG-Nortel joint venture likely accounted for the higher than expected sales in Q4. He said Nortel’s CDMA high-margin CDMA business likely helped gross margins.

Dennison is raising his 2007/2008E EPS estimates to $1.00/$1.86 from $0.66/$1.50 while increasing his stock target price to $28 from $26. “We expect near-term momentum in NT’s stock on the back of CDMA strength and ongoing cost reductions,” he said. “We remain concerned though on the outlook for 2008 when we expect high-margin CDMA revenues to decline substantially. We estimate CDMA contributed 80-90% of overall company EBT in 06.”

Update: The flurry of news over the past 24 hours (CFO Peter Currie’s resignation, the layoffs, the preliminary Q4 rsults) helped All Nortel, All the Time generate record traffic today (2,700 pageviews).

Nortel Restructures….Again

February 7, 2007

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In apparently the final restructuring move and another sign it needs to get leaner and meaner to remain competitive, Nortel will slash another 2,900 employees over the next two years, while moving another 1,000 jobs to “lower-cost locations”. Nortel also plans to shrink its real estate portfolio by 500,000 sq. feet this year – a move that follows the $100-million sale of its sprawling corporate headquarters in Brampton, Ont. last year to Rogers Communications. When completed, the moves will save Nortel about $400-million a year: $300-million due to workforce reductions and $90-million related to real estate.

“We are transforming Nortel, and are focused on building a highly competitive organization that drives innovation and profitable growth,” said Nortel CEO Mike Zafirovski, who added the company will maintain its “industry-competitive” R&D spending at 15% of revenue.

It’s another interesting and probably necessary decision – and you wonder if there is any link between it and CFO Peter Currie’s decision to resign yesterday. Clearly, Zafirovski realizes Nortel can’t be competitively viable if its operating costs aren’t reduced. The question is why now as opposed to six months ago? Another way to look at it is Nortel has little choice but to reduce costs if it wants to remain a stand-alone entity – whereas competitors such as Alcatel and Lucent are trying to do it through consolidation and cost synergies.

Update: For more, check out Local Tech Wire, Blogging Stocks and The Street.com.

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