What to Expect from Nortel in '09

Everyone’s into end-of-year lists so here’s what I see after looking into my crystal ball.

1. The metro Ethernet network business will be sold - probably to Huawei - for between $500-million to $750-million. Nortel (NT) will proclaim it’s a great deal that will help with its new focus on software, service and VoIP. Analysts and investors will not be as enthused.

2. Mike Zafirovski remains CEO even though there’s speculation he’ll be fired in 2009. The company’s in too much flux and uncertainty for the board to turf Mike Z. Meanwhile, few high-quality people would be willing to take the job.

3. More cost-cutting and employee reductions. When Nortel announced 1,300 job cuts in November, it was seen as a minor move as opposed to what was really required. Expect Nortel to do another round or two of cuts to reduce operating costs.

4. After disappointing fourth-quarter results, the stock drops to below 15 cents. Nortel shares are delisted from the NYSE for not trading above $1.

5. As social media becomes more of a corporate communications, marketing and sales tool, Bo Gowan, who runs Nortel’s social media operations, is poached by a company looking to boost its social media activities.

Comments

[bandwidth_b...:]

Mark:

I believe your prediction is far too dark for NT. While you may be correct regarding the near term stock price, it is equally likely there will be a significant rebound. Possible aquisition target is only one possible reason. Also, keep in mind that Nortel DOES have the best VOIP products and TDM systems strategy. Their products are superior in many ways. NT certainly has allot of exposure for catistrophic downside, but the product is unquestionably better than the companies reputation. Someone with a proper understanding of the product and marketing could easily produce a real 10 bagger.

2008 Dec 31 04:01 PM

[bobace:]

1. MEN sale at $500- $750 M would be strategic error when it may be worth more than originally thought ($1B) after the recent (Dec-2008) proof that NT had achieved 100 GB/sec Ethernet transmission over 800KM 100 GB loop.
2. The game plan is to reduce costs and head-count, M's departure may possibly "boost" share price.
3. No doubt that further head-count reduction would be necessary even after the sale of MEN
4. Low probability given that NT can reverse split shares (AGM in May) before the 6 month time to remedy
5. Not going to affect NT or move the stock price.

2008 Dec 31 04:18 PM

[beenhereb4:]

It amazes me that people still believe that product excellence will resurrect this company! It is foolish to believe that the management team that created this mess will be the one to fix it. In the high tech world once a major company falls behind the pack it can never catch up. At best NT will devolve to a microcosm of its former self and play in some little niche while the herd moves on. And no one but a nostalgic few will know because NT's stock will not be traded on any major exchange.

2008 Dec 31 04:36 PM

[american_tech:]

Nortel stock will jump up to more than $4 in 2009. They will sell the MEN for at least $1B and that would have a huge impact on stock. Nortel will get help from government or refinance its debt. Nortel doesn't have any debt due until 2011 and after that it can re-finanace.

I think competitors of Nortel wants it to be gone. They have started to ruine the reputation of the company for years. The company lost a lot of deals as a result of that. Unfortunately it will be tough for Nortel to get the customer confidence back but I beleive it is a high possibility that we see a huge turn around in Nortel that will surprise everybody in the market...

You may think I am so optimistic but just time will tell.

2008 Dec 31 04:39 PM

[FireMr.Z:]

Nortel was a decent company until the CEO incompetense parade lead by John Roth. Mr. Z is just latest overly paid CEO with an even bigger ego, leading the same sad parade of his generation. Add to the disfunctional era, board members on so many different boards involved in so many activities they can not provide sound governance.

Nortel's problem is that it was one of the many victums at the end of a generation of management only interested in what they could earn on the way out to retirement. There was no restructuring plan, it was purely resume stepping stones, paychecks and bonus stops for Mr. Z and his insiders. One more [big] CEO bonus pow-wow to go for M&A, now that most of the big indians are all gone.

This is not rocket science, had there really been a real restructuring plan; It would have been acompanied by a real marketing plan. C'mon!

2008 Dec 31 05:31 PM

[KINGKONG:]

I THINK NT WILL BE TAKEN OVER BY HUAWEI AND BECOME HUAWEI-NORTEL. HAUWEI WILL BECOME A PUBLIC COMPANY AND DOUBLE ITS SIZE. WITH NT'S TECHNOLOGY AND NETWORK IN THE WESTERN WORLD, BOTH COMPANY WILL GROW STRONG AGAIN ITS COMPETITOR. OF COURSE, 1000'S JOBS WILL BE LOSED BUT NT WILL STILL REMAIN A VERY IMPORTANT RESEARCH CENTER FOR HUAWEI.

2008 Dec 31 09:05 PM

[MrGregorio:]

I worked for NT under Roth. Yes, he ruined the company and should be in Jail. How the hell these egotistical CEO's aren't held reponsible for their actions boggles the mind. Two of Roth's senior execs dumped millions of shares just before NT's largest share price drop. Roth said he didn't know about it, and had he known he would have advised them to sell after that price drop so that they could write it off as a tax loss. That tells ya how much money was STOLEN from investors.

ALSO, one day at work long ago Mr. Roth announces a mystery term to all staff of NT and hypes it up to be revealed at a later date....tells us all to remember the term "Right Angle Turn". Months later he has a global conference and announces that NT will now produce only software and no more hardware!!!! We were all in shock as well was the industry since NT's core business is HARDWARE. The idiot Roth had to renounce that since everyone was ready to immediately pull the plug on NT. The term 'Right Angle Turn' applied to the stock price - DOWNTURN.

Can't recall the amount of salary and bonuses this cretin was paid, but it was EXTREME. Hope you read this Roth you crimminal.

Jan 02 11:07 AM

[hawkins23:]

I think your comments are right on the money, the challenging thing is 750 million is not going to provide any long term strategic value..and the move stinks of financial desperation..... and anybody that thinks Nortel still has a "world class" VOIP products" should pick up any trade rag. Nortel has never had world class VOIP products, only world class TDM products. The problem there is customers don't want those products anymore.

Jan 02 02:33 PM

[MichaelinMe...:]

1. Bloggers really enjoy trashing CEO's. How many of you have been a CEO? Not all CEOs are good, but not all are bad. And if you are so good, why doesn't someone like Nortel hire you????

2. Nortel does not have a VoIP strategy. I know from first hand experience.

Jan 05 05:15 PM

[happyNT:]

Spoken by a true Cisco bigot, they would love for Nortel to go under then less impressive products will have a better chance of competing. Cisco hates Nortel because in the big deals where everything counts, Nortel is still winning.


On Dec 31 04:36 PM beenhereb4 wrote:

> It amazes me that people still believe that product excellence will
> resurrect this company! It is foolish to believe that the management
> team that created this mess will be the one to fix it. In the high
> tech world once a major company falls behind the pack it can never
> catch up. At best NT will devolve to a microcosm of its former self
> and play in some little niche while the herd moves on. And no one
> but a nostalgic few will know because NT's stock will not be traded
> on any major exchange.

Jan 05 05:48 PM

[User 336001:]

@ Michael In Mexico

Maybe you should do a little research before you say that Nortel has NO VOIP strategy. Here is a Dec.10th presentation to Barclays from the president of Nortel's VOIP division. Nortel has a signifigant share of the market.

www.nortel.com/corpora...

Nortel's ultimate victory or demise will be a direct result of the strength, quality, and hopefully insanely innovative tenacity of their people. Let's just hope they can keep enough good staff around.

Jan 12 04:53 PM