Why Nortel is Still Important to Canada

Something that rarely gets mentioned when talking about Nortel’s (NT) prospects and future is the important role it has played and currently plays within Canada’s high-tech community.

As the country’s biggest spender on R&D by a country mile, Nortel is still an important part of Canada’s high-tech ecosystem. In addition to providing well-paid jobs, Nortel has been a valuable resource by providing Canada’s high-tech community with a steady flow of well-trained and experience engineers, developers and entrepreneurs. Many people have earned their stripes at Nortel, and then gone on to make important contributions at other companies within the high-tech sector.

If Nortel becomes a smaller and viable entity, the company has a good chance of maintaining its status as Canada’s flagship high-tech company. This is why I believe that if push comes to shove the Canadian government - and some of its agencies such as EDC - will wade into the fray to provide Nortel with some financial support.

If, however, Nortel is sold (There’s speculation Huawei may be interested in buying the whole kit and caboodle), who knows what it would mean for Nortel’s presence in Canada. Maybe Nortel’s corporate headquarters would remain but its operations, including R&D, would be moved out of the country.

This would be a troubling end to Nortel’s Canadian history and, as important, the Canadian high-tech industry.

Juniper to Benefit from Nortel Challenges

NetworkWorld’s Jim Duffy has a story on how Oppenheimer & Co. analyst Ittai Kidron believes Juniper Networks could benefit from Nortel’s financial challenges as enterprise customers explore alternative suppliers.

“We believe recent reports that Nortel is contemplating bankruptcy are likely to force its enterprise channel to look for new alternatives,” Kidron said in a recent report. “With roughly $600M-$700M in quarterly enterprise revenue, we believe Nortel’s enterprise business could deteriorate faster than its carrier business. We expect competitors to aggressively poach Nortel’s channels and enterprise business.”

Earlier this month, Channel Web reported that Juniper was wooing Nortel’s partners. In a letter to Nortel partnership, Frank Vitagliano, Juniper’s senior VP of worldwide channels says:

At Juniper Networks, we understand it can be challenging to navigate the current business landscape while continuing to add value to your customers. In today’s troubled climate, you may have concerns about your continued ability to provide high-performance networking solutions to your customers. We want to help.

Comments

[LastHopes:]

One of the best R&D Bell Labs (LUCENT) has been sold to France (Alcatel). Who is going to pay for Nortel's R&D? Canada or shareholders?

Obviously Huawei would make milk out of Nortel.
Price tag is very low: $7Bil debt - $2Bil cash + $1Bil Market Cap = $6Bil for a whole pie.
Chinese are very good at Buy/Sell, capitalized on the past R&D and destroy any future R&D. I am sure they are going to make huge profits out of it, but they will cut R&D to ZERO and are going to spend only on maintenance and support tasks("R&D"). It is all about profit, but not R&D.
Yes, Canada could convert Nortel to University or government supported lab, but I doubt it would fly.

BTW, the future of Nortel's R&D will be the same as the future of most of Corp acquired by Computer Associates. It is super B model. Buy cheap Corp with customer base and with huge past R&D investments, lay off 90% reduce R&D to 1% and make milk out of it.
It is modern scavenger/parasite model, but it works.

2008 Dec 30 09:23 AM

[Tony Chirul...:]

Yes, killing the R&D by doing nothing is the Canadian government specialty!
Offering money for bailout to International Corporation it is OK, but helping the Canadian Companies it is something almost impossible.
As a result lots of skilled engineers start living Canada and finding jobs in US.
I am one of them.
So Canada is loosing real talented and experienced engineers and brings taxi drivers from third world countries.
Bravo Canadian government kip up the good work!
Pretty soon if this will continue Canada will join the third world league.

2008 Dec 30 12:51 PM

[Naive:]

Actually, all debt is $4.5 bil including all preferred share capital, cash $2.4bil, the portion of debt included that is due 2011 is $1 bil, value of all businesses (ex.debt and cash) is $5.5 bil conservatively under normal conditions. If you do the math you will discover that the business itself will survive in one form or another, but common share holders will not, or will wait a very very very long time. The winners will be debt holders and maybe preferred share holders.


On Dec 30 09:23 AM LastHopes wrote:

> One of the best R&D Bell Labs (LUCENT) has been sold to France (Alcatel).
> Who is going to pay for Nortel's R&D? Canada or shareholders?
>
> Obviously Huawei would make milk out of Nortel.
> Price tag is very low: $7Bil debt - $2Bil cash + $1Bil Market Cap
> = $6Bil for a whole pie.
> Chinese are very good at Buy/Sell, capitalized on the past R&D and
> destroy any future R&D. I am sure they are going to make huge profits
> out of it, but they will cut R&D to ZERO and are going to spend only
> on maintenance and support tasks("R&D&qu.... It is all about profit,
> but not R&D.
> Yes, Canada could convert Nortel to University or government supported
> lab, but I doubt it would fly.
>
> BTW, the future of Nortel's R&D will be the same as the future of
> most of Corp acquired by Computer Associates. It is super B model.
> Buy cheap Corp with customer base and with huge past R&D investments,
> lay off 90% reduce R&D to 1% and make milk out of it.
> It is modern scavenger/parasite model, but it works.

Jan 04 01:22 PM

[american_tech:]

If Nortel sells the MEN for $1B wouldn't be enough to pay the debt due in 2011? What would be a fair stock price for Nortel after selling MEN? Any comments?

Jan 05 08:55 AM