First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.
FAQ: What's going on with Nortel?
- — 25 June, 2009 07:58
With Nokia Siemens bidding on Nortel's wireless business and Avaya rumored to be grabbing up its enterprise gear, it is all but inevitable that the rest of company will be broken up and sold off in pieces, which raises questions. Here are some of them and the answers.
What will happen to Nortel's enterprise customers?
The purchaser of the company's enterprise unit will likely work hard to hold onto it. Radware bought Nortel's application switching business in February and has announced five-year technical support for the Nortel gear. It plans to upgrade the equipment, integrate it into the Radware management platform and has laid out a road map for merging Radware and Nortel product lines. Expect something similar from whoever buys the enterprise gear.
Who is likely to buy the enterprise business?
Reportedly, Avaya has put in a $US500 million bid for the enterprise division, which sells switches, routers and telephony products. With its focus on enterprise VoIP and unified communications, the company could use Nortel enterprise infrastructure, which includes switches, security gear and phones. It would boost Avaya instantly into the No. 4 spot for Layer 2 and 3 Ethernet switching and give it entry into more corporate accounts.
What other divisions are up for sale?
Nortel has units for core carrier VoIP and time-division multiplexing gear and metro Ethernet equipment. The company shopped around the metro Ethernet segment last fall but took it off the market again this spring after it couldn't find a buyer.
What did Nokia Siemens bid on?
Nokia Siemens bid on the CMDA wireless business and the R&D unit working on LTE wireless.The company's technology overlaps with Nortel's, but that's OK because its customer base doesn't overlap as much. Both companies, for example, have CDMA and Long Term Evolution technology, but Nokia Siemens doesn't have anywhere near the penetration into North American carriers that Nortel has. If it closes the deal, Nokia Siemens will do everything it can to take advantage of Nortel's client list. Nokia Siemens says the deal would boost its share of the North American carrier market from less than 6 per cent to more than 30 per cent.
Beyond that, the business Nokia Siemens wants to buy netted $US700 million last year, according to the Wall Street Journal. If it remains that profitable, that will pay off the $US650 million purchase price in less than a year.
Who is likely to bid on the other carrier business?
That is a matter of speculation but the list includes businesses with narrow product lines that sell them into carrier networks. This includes companies such as Nokia Siemens and Sonus Networks.
Who gets the Nortel name?
Maybe nobody. If it fails to liquidate all its assets, Nortel could choose to hang on to what remains and continue operating as Nortel. Or it could sell off the brand as part of the sale of one of its divisions. Or it could sell off all the assets and retire the name.
What happens to Nortel stockholders?
The will likely lose whatever they still have invested in the company. Nortel says it will be delisted from the Toronto Stock Exchange and that means their investments will be lost. The last stock price listed for the company was 18 cents per share, down from its all-time high of about $US900.
How bad are things for Nortel?
Things are pretty bad, or more accurately, pretty bad for Nortel creditors. When it filed for bankruptcy, Nortel assets and debts were pretty close -- assets of $US11.6 billion vs. debt of $US11.8 billion. Estimates this week put the assets closer to $US2 billion. Nortel is seeking protection from its creditors under which the courts will decide the best way to reorganize the company and pay its creditors as much of what is owed as possible. The court is allowing the sell-off, and the proceeds could come up about $US9 billion short.
How did this all come about?
Nortel ran into problems around the time the high-tech bubble burst in 2000. The company stock was selling for an all-time high of $US900 per share (adjusted for splits), but to make its bottom line more attractive, it was also exaggerating its profits -- a $US3.2 billion fraud.
The CEO at the time, Frank Dunn, was fired and fined, as were the CFO and controller.
The company acknowledged its problem in 2004, refiled its financial statements for the previous four years, and hired a new CEO. But the scandal lingered until 2007 when Dunn and others were charged with fraud -- charges they are still fighting.Meanwhile, Nortel went on a campaign to reorganize and downsize, dropping from 95,000 employees in 2000 to 26,000 today. CEO Mike Zafirovski, a turnaround specialist was hired in 2005, but was unable to stop the company's slide despite repeated layoffs, sell-offs and new leadership.
International financial troubles compounded the situation, with plummeting stock performance reducing the company's value and making borrowing more difficult.