Avdude15

Why Did Nortel Fail?

As a former Nortel marketing employee I can tell you that at least on the data side of the business, their marketing organization was completely isolated from the sales organization.

What does that mean? Ask any marketing exec at Nortel, "how many sales leads have you generated? How many sales leads have you shared with channel partners?" - and the answer will be a blank look. They simply did not track those metrics. Critical channel partners have been leaving them for years for the simple reasons that they weren't getting sales leads and they weren't getting co-opt dollars. No channel partners means no-one to sell their products.

What about their own sales organization you ask? 1. They too weren't getting any sales leads from marketing. 2. One big sales force for thousands of products - the sales guys didn't/couldn't specialize or even get to know most of their own products.

This isn't the big picture - but disfunctional marketing combined with the wrong sales organization was a big part of the loss of market share in Ethernet switches, load balancing, security solutions, etc.

Nortel simply has the worst functioning marketing organization I have ever seen.

Nortel: Would a Breakup Unlock Value?

Mike Z and his management team have allowed their enterprise data business to self-distruct. They completely have failed to address the fundimental problems of their enterprise data business including:
1. Failure to deliver a replacement to the aging 8600 ethernet switch (when did it first ship, around 2001?)
2. Failure to ship a replacment to their Alteon application switches - marketshare has gone from 30% to what 4%? Again, when did they last ship a new box, 2002?
3. Failure to create a sale organization capable of selling data products
4. Failure of their marketing organization to understand the data business
5. Failure to do any online marketing
6. Failure to generate sales leads
7. Failure to nuture a data sales channel - try to find a reseller who sells nortel data gear! Try to find one who has been trained in nortel products!

What is Nortel’s Investment Thesis?

What happened to Nortel's data business? Back in 98 they bought Bay Networks for $9 B giving them 16% market share in the high end router market and 37% share in layer 3 switching. Later they bought Alteon for $8B giving them 40+% share in layer 4-7.

They don't seem to have updated their high-end routers since 2000 or their layer 4-7 switches since 2001. Market share in both markets seems to be in single digits and dropping. Are they dropping out of data all together?