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Wireless Utopia

The journey towards a free wireless world.

The Wirting on the Wall

Sunday, May 21, 2006

Red Herring has a detailed look at the state of Nortel and the challenges the new CEO faces. With its illustrious history and still a huge market cap of 11 billion, its state right now is woeful. Since the internet bubble it has been in the red and suffering losses every quarter. Even with the aggressive reform and restructuring plan its going to take a long time before its golry is recaptured. Its biggest competitor in North America, Lucent, gave up and got acquired by Alactel. Nortel is still fighting on.

The more interesting part of the article is the subtle hints in it, with far reaching implications. The most fascinating is the option of sellout in those areas in which it does not mark up to 20 % of the market share. The 3G program is amongst them. Nokia and Ericsson would be definately interested in it. It would take them to a dominant position in the market. Not to mention Huawei. That would give them a foot hold in the North American market its looking for. A lot of greedy eyes would be on Nortel at this moment.

Another route for Nortel is going into the Enterprise Services market, a la IBM. Cisco is the leading player right now in the Enterprise networks market and it can certainly do with a competitor. But then historically it has been a R&D driven product company. It would be a paradigm shift for them and definately diffcult for such a mammoth company.

Acquiring R&D startups and going into new technology, WiMAX and VoIP is another option. The Nortel stamp on product from such companies would add credibitlity and gain industry acceptance. Its a logical path for them. The low demand for 2G voice entric equipment led it into the red. Maybe the emerging technologies can lead it back. The only question is the bet on such technologies. Nobody knows which one will succeed!

But the best hint by far is the possibility of a complete sellout, uthinkable sometime back. But with Lucent leading the way, it does become an option for them as well. The impending market alignment is on the cards and the grapewine is buzzing with all sorts of rumor. The threat posed by low cost players like Huawei and ZTE is real. Its either align or perish.

The writing is definately on the Wall.

Previous Post: The Consolidation Wave.

Update: Some more hints on Nortel's UMTS business.

Tags: Nortel M&A Lucent Alcatel Nokia Ericsson Huawei ZTE Telecom
posted by Rajiv, 7:46 AM


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