With Nortel’s ongoing financial woes it follows that they would start trimming nonyielding products/services. Sadly one of them has been their WiMax product line. –
Fallout from Nortel Network Corp.’s financial troubles has forced the Canadian giant to end its mobile WiMAX business and sever its ties with Alvarion Ltd.
Nortel officials said Thursday the decision allows the company to narrow its focus, manage investments and strengthen its long-term competitiveness in its carrier business by dropping out of the 4G technology that is being heavily backed by Alvarion.
This poses a problem for WiMax. Cisco from what I see in the industry seems to have a preference for LTE. Not that I am saying the would not sell WiMax. But their ties to the telcos fosters a follow the money attitude.
That of course being the number 1 question for them. The problem is they are worse than a Telco with way too much paid for in previous acquisitions. Not only that but they still have a longtail of a Comm division business that is not paying out the rates to support that end of the company –
“As an incumbent telco equipment maker, Nortel was way too slow to embrace the reality of the change in the market that they served,” says Thomas Nolle, president of consultancy CIMI Corp. “They should have been the No. 1 provider of routers to telcos. Hubris . . . prevented them from strategically absorbing Bay even though they financially absorbed them.” ( Dell’Oro lumps Nortel into the “other” category in the telco router market, which has a 4% share of the $2.2 billion pie in the third quarter, well behind leaders such as Cisco and Juniper).
Nortel plodded along for years with stagnant or declining growth in IP routing and Layers 2, 3 and 4-7 switching, compiling just a 3.8% share of the $18 billion market in 2007. Meanwhile, the fraud forced the company to restate years of financial results, a situation inherited by CEO Mike Zafirovski when he took the Nortel reins in 2005.
But Zafirovski’s efforts to restructure Nortel and get it back on track by focusing on 4G wireless, unified communications for enterprises, Carrier Ethernet and services have been largely fruitless — culminating in last week’s bankruptcy protection filings. Two days before the filing, Nortel unveiled a new line of stackable Gigabit Ethernet switches.
Some watchers believe Nortel assets in its Carrier, Ethernet Solutions and Metro Ethernet operations, which went on the block in September, will be sold off and its share in key markets dispersed among competitors. Others say Nortel may emerge focused solely on the enterprise and services, leveraging its strength in VoIP and alliance with Microsoft for unified communications.
Sadly, we need Nortel to survive at least in the data transport arena. Cisco is a very arrogant company. They would be unbearable in an environment where they are the clear market leader by a 2:1 margin.
Bay Networks probably ought to be spun off to give it a chance to survive. Whether they can or not is a different issue. But saddled to a horse with a busted leg guarantees their disappearing.
Act One: Nortel appears to be headed for bankruptcy court. They have made arrangements with their outside counsel to acquire the necessary talent for a filing. –
Nortel Networks Corp. has sought legal counsel regarding bankruptcy protection, according to a published report.
The Canadian networking equipment company is seeking the legal advice to protect the company from creditors in case a restructuring plan fails, according to a report in today’s Wall Street Journal. The Journal also reported that the Toronto-based company may ask the Canadian government for help.
I don’t think I need to tell you that this is NOT good news. Think Cisco is gouging you now. Wait till they are the lone enterprise network supplier. ‘To the Moon Alice!’
Act Two: The FSF files suit against Cisco for GPL infringement. Most of the suit hinges on the Linksys brand. The tools infringed on are GCC, C, binutils, ie the guts of any C language build one would use for embedded project development.
I would figure that FSF has the goods. Most C compilers has certain ‘signatures’ that are readily identifiable in the underly assembler code by mere inspection. Some even go so far as to leave a label area with the name of the complier used by name. Kinda like a low level version of a meta tag in HTML –
BOSTON, Massachusetts, USA — Thursday, December 11, 2008 — The Free Software Foundation (FSF) today announced that it has filed a copyright infringement lawsuit against Cisco. The FSF’s complaint alleges that in the course of distributing various products under the Linksys brand Cisco has violated the licenses of many programs on which the FSF holds copyright, including GCC, binutils, and the GNU C Library. In doing so, Cisco has denied its users their right to share and modify the software.
Most of these programs are licensed under the GNU General Public License (GPL), and the rest are under the GNU Lesser General Public License (LGPL). Both these licenses encourage everyone, including companies like Cisco, to modify the software as they see fit and then share it with others, under certain conditions. One of those conditions says that anyone who redistributes the software must also provide their recipients with the source code to that program. The FSF has documented many instances where Cisco has distributed licensed software but failed to provide its customers with the corresponding source code.
Now the reason I post these two acts is that generally one action has consequences to another. Is the Nortel plight related to Cisco inappropriate behavior? I have no smoking gun either way but one has to ask. The effects could be broader than licensing. If it can be shown that the entire Linksys line was unfairly placed in the market Nortel might be able to make hay over it. Nor would Nortel have to enter into US court to do so. The would go for a NAFTA board adjudication. That could get nasty.
Epilogue: The folks at InfoWorld ask the question — Is Cisco an Open Source Leech?
That folks is their quarterly loss not their capitalization. If somebody would give me .1% positive net off that deal, I’ll stop posting here and send postcards from the South of France. The prescriptive of course is thousands lose their jobs as a consequence. The analysts can’t even paper it over –
NORTEL NETWORKS CORP. FACES AN UPHILL CLIMB following a third quarter where the company reported losses of $3.4 billion and said it would cut thousands of jobs and say goodbye to a number of high-ranking executives.
Analysts said tough times are ahead and one even suggested bankruptcy could be a possibility for the Canadian networking equipment company.
“It is not a pretty picture,” said Ronald Gruia, a consulting analyst for Frost & Sullivan. “There is no way to sugarcoat it.”
In a note written by RBC Capital Markets’ analyst Mark Sue, Nortel could run out of money before 2011 when its $1 billion bonds mature.
“Considering the worsening macro environment, Nortel’s challenged industry position and concerns related to liquidity while the capital markets are basically closed, we think bankruptcy is a distinct possibility down the road,” according to Sue’s note.
Nortel’s stock also had a rough few days following its third-quarter financials. The stock fell to 65 cents per share on Wednesday, before bouncing back to 78 cents per share on Thursday. But by Friday the company’s stock was down again trading at 56 cents cents per share. Sue cut his projected target price for Nortel’s stock from $1.50 to zero.
Ouch! When an analyst says your stock is worth $0 then baby its time to rethink the game plan. Nortel’s biggest problem other than financial is lack of vision. They have for years played second fiddle to Cisco even though much of their product line is on par with their rival. Even some of their acquisitions have made more sense that Cisco’s. But they are not viewed as a leader in the space. That never good positioning for a IT player.
Well Nortel’s quarterly results are in and the results are below analysts expectations. Then always seems to be a ongoing theme with Nortel. Seems about every 5 years or so they take their eye off market changes and have to knock heads to get back in the game. –
The value of Nortel Networks Corp.’s stock was cut in half after the company announced a restructuring, including plans to sell off its Metro Ethernet Networks business and “mitigate the risks” in its LTE, 4G effort. Market watchers took the language to indicate hopes for a potential teaming with another wireless infrastructure company.
The news coincided with a preview of Nortel’s third quarter; the company expects revenues of about $2.3 billion and gross margin of 39%, numbers down from previous expectations. Nortel blamed the drop on the “sustained and expanding” economic downturn as well as “product delivery delays.”
The news is just the latest in a long string of troubling issues at the company. Nortel suffered years of financial difficulties following the tech blowout at the turn of the century. Although things had seemed to turn a corner with the addition of CEO Mike Zafirovski, a mix of sluggish spending and wider, macro-economic troubles have served to pull the company back to the edge.
Nortel’s stock dropped from around $5 per share to around $2.50 per share after the company’s restructuring announcement earlier this week.
Here’s Nortel’s stock over the last 3 months. —
I take particular note over the the phrase ‘mitigate risks in the LTE…’. It would appear that all is not rosy in the LTE development cycle for Nortel. Question is are they solving the issue internally or are they going to go outside and find a partner?
The plunge is not some new venture but Nortel’s stock price. Friday’s close has their stock down by 15% on a flat 2Q earnings report. The importance of this I will get to in a minute. But first here is the 5 day action last week. –
The consideration? Cisco and Nortel are infrastructure vendors. They have retail presence of course, but the main body of their income streams is selling to corporations. When corporations stop investing due to lessened consumer demand companies like Cisco and Nortel feel the draft. It will be interesting to compare Cisco’s 2Q results.
Now were I a smart Muni looking for a Wifi/Wimax supplier I would be tapping both these firms. They’re going to be hungry and will sweeten the pot and lower their prices. Just like the housing market now is the time to buy network infrastructure.
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