How dead is Nortel?
February 3rd, 2010Analysts 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 $800 million carrier VoIP business is currently up for bid, with Genband initially offering $282 million for the business; enterprise has been sold to Avaya for $900 million; Metro Ethernet and optical went to Ciena for $769 million; and CDMA, LTE and GSM wireless assets were split between Ericsson and Kapsch for $1.23 billion.
The Rise and Fall of Nortel
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.