atcomsystems.ca/forum Forums General Telecom News Nortel in Trouble?

Ottawa Citizen article pegs the once telecom giant as a penny stock.

Interesting, wish I had $1000.00 to spare, I'd be jumpin' on that stock. Although I just might watch for a week to see where it goes. And then break my leg kicking myself in the butt when it quadruples over the weekend! John C.

I don't know if I would count them out just yet. for years there is always talk about Nortel going down the toilet and they are still here. Just more scare tactics by the media.

Same with Mitel, they got into trouble more than once and came back. Maybe someone from Canada can confirm this, but I was told that Mitel headquarters is very close to Nortel HQ, and engineers move back and forth as demands and $$ dictate. John C.

Mitel is about 3 miles from where I live. Nortel is in Toronto.

Nortel shares are currently 0.12 of earnings at $2.50. Typically a company's stock value is 2 to 3 times earnings. It is a huge bargain if they can turn it around. Hard to believe share prices were $120.00 in 2001.

Remember they also did a 10 for 1 reverse split in an effort to prevent delisting from the stock exchange. At close they were $2.91....that's 29 cents before the reverse split.

This reminds me of that "beer can investment" comparison joke. That one has been around for years. I guess that as funny as it seemed at the time, it wasn't too far from the mark and isn't so funny now. Nortel isn't the only one. Sad...

Avaya didn't make it this far and ended up going private. That was probably the smart thing to do on their part. Other big names got picked up by foreign and completely unrelated ownership and their being able to survive in this market is all about the nickels and dimes.

Ten years from now, we are all going to be asking ourselves how we even existed in this industry. It is hard on a daily basis anymore.

First of all, keep in mind the following:

1. I come from a small/medium system background, and recently moved into the PBX world.
2. I don't like Cisco, or the idea of 100% IP phones.

Ok, that in mind, I think one thing Nortel could do to improve is, well, actually improve. I think Nortel has been around for so long and has done well for so long that they act like they don't have to show much innovation. Cisco, on the other hand, comes out with innovative things that people want to see; things that sell their systems to CEO's on the golf course, because they are new to the phone market and have to prove (or market) themselves one way or another. I'm working on a new version of an old Nortel system (Option 11 upgraded to a CS1000E), yet time and time again I run into things that the system is not capable of doing, that my key systems can do, even my old Siemens Saturn III can do, and these aren't the innovative things I'm referring to; these are some things I would consider fundamental. There are also the innovative things that other systems, including some of my key systems, or a Cisco system, can do, that this improved Nortel system flat out can't do.

I'm not saying this is the root of all of Nortel's problems. What I'm saying is that I don't see how they can prevent companies like Cisco from stealing away their market share when they do almost zero marketing of themselves, and they bring very little to the table when it comes to the innovative solutions that sell systems.

I think if they brought their stable and rock-solid systems, and added some modern innovations to them, along with some decent marketing, they might actually gain back some of that market share. They currently still have Cisco beat on stability (unless you want to pay much more to get that stability in a Cisco solution); if they could only use that to their advantage as a springboard to add in the other things and blow the doors off Cisco.

Justin

Excellent rebuttal, Justin. I agree with you. Nortel has had a long-term relationship with most major telcos, including all of the Bell companies. These relationships were solid to the extent that they really didn't have any incentive to improve. The customers get what the phone company says they will get.

After the divestiture of the Bell System in 1984, the "Baby" Bell companies ran as far away from AT&T as they could. Nortel was waiting there with open arms to take them in. In no time, these telcos were opting to buy Nortel's DMS central offices instead of the status quo ESS. This was unheard of at the time, "Bell companies buying non-Bell hardware"? YES, the Bell companies now had the luxury to shop for the first time in their histories. Since they were now on their own, they needed to save everywhere they could. Gone were the days of long-distance subsidies, etc.

Forward to 2008:

Nortel has become too complacent with what were cozy relationships with telcos. The telcos don't maintain such loyalty and they continue to shop for the bottom dollar product. Everyone hates telcos these days, so the last thing that customers are going to do is buy what the LEC has to sell. Hey, the typical customer is seeking any alternative to the LEC. They have gotten sick of the "sharp stick in the eye" they have been receiving as customers for years.

Telcos probably represent 75% of Nortel's system sales revenue in North America and that part is waining. The other 25% is the regular interconnects trying to sell their products in this difficult market. Either way, they are taking it from both ends.

Will they survive the industry's current situation? Yes. The problem is that they are operating on razor-thin budgets and have been for years. This is why they lack feature advancement. Their products are solid and reliable, but boring. Kind of like today's version of 1A2. Nortel has become the IBM of telephone equipment manufacturers.

Let's just say that it's safe to say that nothing new and exciting will be coming out of Nortel's R&D department until they get some money. When that happens is certainly anyone's guess.

Sort of off-topic, but not. Why has Nortel,and Mitel, and Avaya, and everybody else, it seems, gone to hard drives to provide the ram, o/s and everything else, in addition to AA/VM. I'd think that they would keep the phone system on a flash card and the AA/VM on a hard drive. I'm sorry, but hard drives to me are about as unreliable a support system for phone system as you could possibly pick! John C.