Vladimir Senkov

Can Nortel Pull an AMD on Cisco? Enough To Make It Worth Another Look?

I've been hearing those "competing with cisco" theme and later "number 2 supplier" theme from NT management ever since they acquired Bay. Nowdays there are plenty of suppliers out there and unfortunately NT is not a no 2. If NT management instead focused on areas where they could actually win customers (instead of just drumming up on the competing with cisco theme) they could have bought Juniper back when it was cheap, they could have grown their security products and other acquisitions into something that would continue to be relevant today, they would continue to innovate in the voice space, they would have good products.
Instead, they've spent years and millions on projects and products that didn't go nowhere, there there was F.Dunn, then Bill Owens with PEC acquisition and "getting ship under control" mode of operation, then MikeZ with more cost cutting and outsourcing. No, they aren't trying to be No2. They are trying to get stable and control their expenses so that they're not vulnerable in the market place (MikeZ wouldn't want any hostile takeovers) and they'll perhaps try to make some money in service. The "No2 against Cisco" theme will continue on and off for some time, but it is more of a distraction, it's not for real.
If you are still in doubt, take a look at Nortel's router portfolio. I know, I know, 8600 is a good box, but that's about it, really.
To compete with Cisco you need a little bit more than that in the product department. Where can you get those products? You can either acquire them (unlikely, although another small move like Tasman is possible) or develop (possible, but takes a long time and is very costly, especially given the "milking" culture. Both of these alternatives are incompatible with cost savings agenda currently in place. Better operations is not a replacement for innovation, no matter how much better, and I think they know it.
So service business and deals, deals, deals. Continue to milk huge customer and install bases, sell off a few divisions, cut costs some more. At some point sell the remainder to someone who is in the service business or perhaps even some private equity (if Canada allows that, i doubt it will).