Whither Nortel?

Nortel’s quarterly loss of $3.41 billion came as no surprise and the same can be said for its plans to lay off ca. 1,300 workers.  What is surprising is the inclusion of four top executives on the list of those to be laid off and that these four were recently recruited from other tech companies to aid in what one now might consider Nortel’s futile turnaround efforts.

Nortel has not caught a break since 2005, when CEO Frank Dunn was “terminated for cause” in conjunction with the discovery of his manipulation of Nortel’s financials to generate higher bonuses for himself and several colleagues.  The company has a colorful history dating back to its founding in 1895 as Northern Electric and Manufacturing, a supplier of phones and other devices spun off from Bell Telephone of Canada.  It started looking into ways of using fiber optic cable in the 1960s at which time it also began designing digital telecommunications equipment.

In 1976, the company changed its name to Northern Telecom and announced Digital World, a family of digital telecommunications products that were industry leading.  The DMS-100 became a mainstay of telephone company central offices (it could handle 100,000 subscriber lines without breaking a sweat) and the DMS line contributed greatly to the company’s profits for 15 years.

In 1998, with the acquisition of Bay Networks, the company changed its name once again, this time to Nortel Networks.  It gained prominence in the late 1990s as a manufacturer of fiber optic gear used to transport massive amounts of data over the Internet but was also one of the first casualties when the telecom bubble of the time burst, sending the company’s market capitalization from $398 billion (Canadian) in September 2000 to $5 billion in August 2002.

Now the company, which dropped “Network” from its brand but not from its legal name, will restructure into three business units: Enterprise, Carrier Networks, and Metro Ethernet Networks.  This time it looks like Nortel is preparing to sell off parts of the company as opposed to cutting costs.

Now, about those executives who were laid off: John Roese, Nortel’s CTO, spent the last 28 months trying to make sense of mishmash (yes, that’s the technical term) of technologies he found when he came on board.  He was also the public face of the company’s turnaround.  Chief marketing officer Lauren Flaherty joined Nortel from IBM just two years ago.  She too is leaving, as is Dietmar Wendt, another IBMer, who propelled Nortel into telepresence, and Bill Nelson, a recent hire from EMC and Nortel’s EVP of global sales.

It’s probably far too late for Nortel to recapture its position as an industry leader but it would be sad to see the Nortel name disappear completely from the marketplace.

Jonathan B. Spira is CEO and Chief Analyst at Basex.

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