Nortel News: Dell Deal, RIM Factoids, Hotel Project With Cisco, R&D Spending

Dell Deal

Lost amid Microsoft’s (MSFT) announcement last week about its unified communications products was a deal that will sell Nortel’s (NT) enterprise products, including its VoIP, data and wireless networking products. To support its sales activities, Dell (DELL) will also be using Nortel’s professional services.

While Dell is known more for selling PCs and laptops, it seems like a pretty solid move given Dell’s strong presence in the business market. For Nortel, it’s really a no-lose proposition: if Dell succeeds, then everyone’s happy. If sales don’t take off, then it’s nothing ventured, nothing lost.

News Tidbits

A couple of, well, interesting reads for Nortel watchers:

The Regina-Leader Post ran a “story” by Kevin Johnston (a branch manager for Scotia McLeod) about how Nortel’s prospects appear promising now that its accounting and legal woes are finally behind it.

Johnston does some math based on what analysts expects Nortel to make in 2008 ($1.14 a share), multiples it what the company’s competitors trade at (18X), and determines Norel shares are worth $21; or $30 if you embrace Scotia McLeod’s $1.69/share target.

“I believe the stock presents a favorable risk-versus-reward ratio at current levels,” he writes. “Fourth-quarter results are the next upcoming event, as they could finally restore investor confidence and shape the outlook for 2008.”

Meanwhile, the Globe and Mail’s Derek DeCloet has a column on what Nortel could learn from Cisco (CSCO). It features this great quote from Cisco’s John Chambers when asked if Cisco has any interest in buying Nortel:

“It’s too different culturally. It’s geography, it’s culture, it’s size,” he said, adding that “Nortel, in my opinion, is a very good company and it has great engineers. I admire them very much. However, regardless of how good a position you are in today, if you don’t catch the major tipping points … no matter how strong you are and how well you execute, you get left behind.”

Rimm vs. Nortel Factoids

Some interesting factoids complements of Neil Murray in the London Free Press:

RIM (RIMM) currently accounts for a 72% weighting in the TSX technology sector. However, it’s overall weighting within the TSX is 3.5%, compared with Nortel, which was well over 30% during the peak of the telecom boom in 2000.

RIM’s market capitalization is currently $64.1 billion compared to $71.1 billion for Royal Bank. RIM is already bigger than Yahoo (YHOO), Motorola (MOT), EMC (EMC), Texas Instruments (TXN), and Ebay (EBAY). Nortel’s market cap is $7-billion.

Nortel, Cisco Team Up

It’s not an acquisition but a contract that Intercontinental Hotels Group announced earlier this week with Cisco and Nortel to provide telecom and networking technology in its hotels in the MIddle East and Africa.

Cisco will provide its Hospitality Solutions technology to offer hotel guests connectivity through IHG’s hotels, while Nortel will be installing a VoIP network, IP phones, data networking equipment and other network equipment.

“The idea behind us being aligned with two vendors is to give our owners the choice,” said Ali Saeb, director of IT at IHG, Middle East and Africa. “The main challenge for us in enhancing the guest experience is having the right equipment. When we have an agreement in place, we have the luxury of getting more and paying less.”

IHG, which owns the Holiday Inn chain, currently operates 74 properties across the Middle East and Africa region, and has plans to double this number by the end of 2010.

Nortel Still Leading R&D Player

Canada’s leading research and development companies spent 3.8% less in 2006, according to Research Infosource Inc. - which really begs the question why it took nearly 10 months to compile this information given we live in a digital age where information is more readily available than ever before.

Nortel continues to be the leading R&D player with spending of $2.2-billion, a 2.2% decline from 2005, but still pretty impressive given it’s about 20% of revenue. Of course, don’t expect Nortel to maintain this kind of revenue-to-R&D ratio as it focuses on controlling costs.

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[ali saeb]

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