How dead is Nortel?

Analysts debate the future of Nortel

Analysts are mixed on whether Nortel, the disintegrating telecom titan, will survive in some form or die off, becoming a distant memory of a bygone era and century.

Nortel has sold off the majority of its assets since declaring bankruptcy a year ago. Its $US800 million carrier VoIP business is currently up for bid, with Genband initially offering $US282 million for the business; enterprise has been sold to Avaya for $US900 million; Metro Ethernet and optical went to Ciena for $US769 million; and CDMA, LTE and GSM wireless assets were split between Ericsson and Kapsch for $US1.23 billion.

What's left are patents and other intellectual property rights in areas such as LTE, a majority stake in the LG-Nortel joint venture and Nortel's Passport multiservice switches, which address a market in decline. Can Nortel leverage any of these to re-establish a foothold in the industry?

"Nortel still has a viable brand," says Tom Nolle, president of consultancy CIMI Corp. "Given that, and the fact there's been a lot of revolutionary changes in the industry, that could create new opportunities for service provider equipment vendors. My feeling is a smart private equity or even an internal group of Nortel people could rebuild something that would in effect behave like a start-up but would have the Nortel brand associated with it."

Others are not as optimisitic.

"The brand has been de-valued astronomically," says Frank Dzubeck, president of consultancy Communications Network Architects. "I think Nortel is part of the history of the 20th century. And it's not going to be part of the 21st."

Nortel cannot pay off shareholders or its pension obligations with the proceeds from its asset liquidation, Dzubeck notes. There's a possibility that what's left of Nortel could be managed in a portfolio to generate recurring income -- but any future reincarnation of the company would be up to the bankruptcy court and the Canadian government, Dzubeck says.

"Getting into the hardware infrastructure business is a fate worse than death today," Dzubeck says. "Any venture capitalist will tell you that. And the only way to do it is to have the federal government be a part of it. I don't think the Canadian government wants to be in the communications hardware business."

As a result, Dzubeck believes Nortel will fade from the scene entirely.

Nolle thinks otherwise. He believes investors could buy Nortel intellectual property and naming rights and build a product portfolio around it with the familiar and -- at one time -- trusted brand. In essence, Nortel would be reborn, though as a much smaller, more finely targeted equipment vendor.

"The thing that makes the most sense is this concept of reignition," Nolle says. "I think it'd be a smart move and something the Canadian government would like to see. I think it's got as good chance as any of the other options. If it's retaining its patents and intellectual properties, it's retaining its bridge to the future without any ties to the past."

Indeed, Nolle says he's heard from his internal Nortel contacts that some company executives were interested in pursuing this option. Reports surfaced last year that some former Nortel executives were lobbying the Canadian government for cash to keep the company afloat.

"I haven't heard that they've gotten any traction on it," Nolle says. He did not know who the Nortel executives are that are trying to reinvent the company.

"Once you get to a certain point, the residual remains are worth more if you can keep them together," Nolle says. "If they license out the IP, they're going to get a pittance for it. And once they've done that, the brand is a shell. It diminishes the value of the brand enormously. But if they can't get financing it won't matter.

"If we weren't in the aftermath of a financial and credit crisis, I would say that this reignition approach was almost a certainty. The question would be whether they can get the financing for it."

That track has been followed before with companies such as Digital Equipment Corp. and Shiva, notes Zeus Kerravala of the Yankee Group. The efforts were ultimately unsuccessful.

But Nortel would have to branch out beyond the patents and passports and brand names left behind it in order to make reinvention work, according to Kerravala.

"If they were going to do it, I doubt it would have the Nortel brand name," he says. "I think we've seen the last of that. Too much damage has been done. And all of the high-value [assets] have been sold off. Whatever's left, you wouldn't want to rally around that."

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 AvayanortelYankee GroupShivaDigital Cquipment CorpCommunications Network Architects

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

Jim Duffy

Network World
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?