Tag Archives: nortel

Closing the Chapter (orignally posted on Aug 2009)

Nortel had once the market cap of over 200 billion dollars. The shares were trading less than a penny while it filed for chapter 11. For most part it’s the financial and operating mismanagement that’s underlining the collapse. Now whether Nortel emerges successfully remains to be seen, there is no doubt that it will have to sell off most of its flagship businesses. Up for grabs is its Metro Ethernet business, and others could include Unified Communication division, Enterprise Networking division and wireless business. The likely suitors and bidders are being speculated, but it will be interesting what will be retained while it’s going through the bankruptcy process.

For someone who has started their career with Nortel, its disappointing to see its collapse, but as an ex- insider this wasn’t as surprising. Reeling with dotcom bust, accounting scandals, and mismanagement, the company was fighting an uphill battle just to break even. Putting behind all the losses, to make the company profitable again, Nortel hired Mike Z from Moto in a hope of revamping its operating structure drastically. Lots of changes were brought into the company including adoption of six sigma paradigm, a decision with an outcome that is still uncertain. I ditched Nortel, just about when sig sigma was being introduced. To me it was the last thing Nortel needed and a blow to the company already leaning south. Not discounting LSS, I felt is was wrong time and place for it. This was precisely the time; the focus should have been R&D and innovation. It was a time to encourage the great research and technical potential to create new products, reassert technical leadership where Nortel was loosing ground and restore the customer confidence as a company what will deliver strong products into the future that is worthy of a long lasting relationship. LSS should have/could have followed. More outsiders didn’t either value or didn’t understand where Nortel’s core potential lied. The new CEO proved to be no different.

The new initiative did yield certain results that showed improved customer satisfaction and retention; however customers were not certain as to what the company was doing for the products they expected to help them effectively compete in the market that’s coming in next decade. Most of the ¾ of the employee base that Nortel let go during the beginning of this decade were absorbed by competitors and upstarts who made bets on Nortel’s loosing ground and catered to that very need of Nortel’s core customers. Share holders realized this development and started dumping the stock. I don’t know why it was so hard for executive management to realize. With these inefficiencies, the current recession gave a final blow and put Nortel -or at least the Nortel we once known and felt proud of-, to rest.

There are probably more people who wanted to see Nortel survive and thrive than the people who wished otherwise. Those shareholders who hanged on to the stock even after loosing millions, even those employees who lost their life’s savings in their 401k, even those customers who remained loyal, all for the institution that is was once.