Vast Installed Base May Save Company

By Chris Preimesberger  |  Posted 2009-01-14 Print this article Print

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."

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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