Vast Installed Base May Save Company
Despite the Chapter 11 filing, analysts and telecom industry people
contacted by eWEEK believe that its vast installed base of customers
around the world may end up being the company's saving grace.
The prospect of Nortel dropping out of the business entirely would leave an enormous product/service/maintenance gap in the telecom departments of a large number of Fortune 1000 companies.
"It is a tough economic environment for many, many companies -- Nortel has been working to restructure in this environment, and has simply run out of runway before they got back off of the ground," Henry Dewing, a principal anlayst at Forrester Research who specializes in the telecom market, told eWEEK.
"Today's actions should allow them to add some distance to that runway."
How long as this been in the works?
"Nortel has been using cash faster than it brings it in for some time," Dewing said. "Financial troubles have come and gone at Nortel since the last bubble burst in 2001, but they have continued to satisfy customers and continue to deliver market leading technology. These assets give them a foundation on which to build a restructured business."
Company may have to sell off some assets
Charles King, principal analyst with Pund-IT, said it's possible that some divisions of the company could be sold off to bring cash to continue operations.
"It depends upon what happens with the company," King told eWEEK. "The $2.4 billion they have in cash is relatively healthy, but with the economic tsunami washing against everybody's shores, I'm not sure how long that will last.
"It might be that they will get rid of under-performing divisions or assets, and try to reorganize around the strongest pieces of the company. I would think that the parts of the company that make those infrastructure pieces so many Nortel customers depend on would hopefully continue to get support from the businesses that buy those products."
Can the company bounce back into prominence?
"I believe that Nortel still has significant importance across networking and telecom markets," Dewing of Forrester said.
"The enterprise business has been a bright spot in Nortel's operations - and I believe the initiatives they have begun in services with Microsoft/Dell, as well as in enterprise video, will drive revenue and margin growth as these business lines grow and mature at Nortel."