Nortel customers don't need to panic, analysts say

But big customers should start looking at other vendors

Nortel Networks customers: Don't panic and rip out your Nortel gear.

That's the advice of analysts who follow the Toronto-based network equipment provider, which filed Wednesday for protection from creditors under chapter 11 of US bankruptcy laws.

While the Chapter 11 filing may sound dire, it is not as serious as it might have been with a Chapter 7 filing. The Chapter 11 law is designed to give companies in financial trouble some to organize a plan for paying off debts, analysts noted.

But having Nortel in Chapter 11 can be a thorny problem for the CIO of a large company that has entrusted its vital networks to Nortel, especially because Nortel has been under financial strain for around four years and faces debts of US$4 billion, analysts said. The company's stock price has slipped well below a $1, and closed Tuesday at 32 cents.

"If I was a board member of a company using Nortel for mission critical needs, I'd be asking the CIO what the hell they were doing," said Zeus Kerravala, an analyst with Yankee Group in Boston.

Kerravala said that a potential bankruptcy filing was expected last fall, so Wednesday's news is not a surprise.

At the same time, Kerravala and analyst Jack Gold of J.Gold Associates, said nothing urgent has happened Wednesday. In fact, a Chapter 11 filing will help Nortel protect what cash it has, they noted.

What CIOs face is a more strategic decision, and if they are undergoing a upgrade of a part of a network, it might be time to look to other vendors, analysts agreed.

"Nortel does face a customer perception issue with customers saying, 'Do I want to invest any further money with a company whose future is unclear?'" Kerravala said. "When they come out of Chapter 11, they may look a lot different, but during this period, Nortel won't invest in small companies with innovative technologies."

Gold said that big Nortel customers need to weigh what is happening carefully. "If I were a big company using all kinds of Nortel gear and I was facing an equipment refresh, I'd be very hesitant to use Nortel," he said

In a video address on the company's Web site, Nortel CEO Mike Zafirovski addressed Nortel customers head-on, assuring them that Nortel is "100 percent commmitted to customers" and that Nortel employees "all remain very committed to the future of Nortel."

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags nortelbankruptcy

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Matt Hamblen

Computerworld
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?