Nortel comments : not interested in Newbridge:
Thursday, February 03, 2000
Nortel set to be top Internet supplier:
Roth
Jill Vardy
Financial Post
OTTAWA - Nortel
Networks Corp.'s spinoff
from BCE Inc. leaves it free
to aggressively pursue its
strategy to be the world's
top supplier of the networks
on which the Internet runs,
John Roth, Nortel's chief
executive, said in an
interview yesterday.
But that strategy doesn't
include the purchase of
Newbridge Networks Corp.,
Mr. Roth said.
"We've got a product
portfolio that's got almost a
total overlap of what
Newbridge represents, so
we wouldn't be doing that,"
he said.
In his first interview since
BCE said it will turn over to
its shareholders most of its
$73-billion stake in Nortel,
Mr. Roth said Nortel is
close to achieving his goal
of making the company a
one-stop supplier of Internet
networks.
"The BCE event doesn't
change direction. It's just a step along the way," said Mr. Roth, fresh from briefing
major investors on the company's strategic plans in the wake of the share transfer.
He said Nortel has crossed the apex of the "right-angle turn" it has made since he took
over control of the company in October, 1997. That turn has positioned Nortel square
in the middle of the Internet networking business, which is growing at about 30% a
year -- compared to a 3% annual growth rate for its traditional voice networking
business.
"We've become one of a very few companies that the industry now regards as
competent in building Internet networks," Mr. Roth said.
The divestiture of BCE's shares helps remove the perception that Nortel, which wants to
supply networking equipment to everyone building a network, is in the back pocket of
BCE and its rapidly growing list of U.S. partners, including Southwestern Bell,
Ameritech Corp. and Lycos Inc.
"The association with BCE has been a good one for both companies for many years. At
the same time, over the years we've known we're going in different directions," he said.
"We've finally grown up. And leaving home and establishing your own residence is a
good thing to do."
"Nortel supplies everybody, and we'd like to supply them all equally. If we were still
part of this equation ... people start to think 'Is Nortel really objective? Or are they
giving the BCE camp of companies preference?" he continued. "While we would
protest that we would never do anything like that, a 40% stake is kind of hard to
ignore."
"Whether it ever influenced a [customer] decision or not we can't really say, but it
certainly was a topic of discussion," he added.
He said the company will benefit from added liquidity in the market now that the 39%
stake owned by BCE will be freely trading. "Only 60% of our stock has traded each
day ... making our liquidity quite low," he said. When it was pointed out that the lack of
liquidity hasn't dampened the stock price increase in recent months -- it has more than
doubled since last October -- he said, "Think of what it would have been if it had all
been out ."
Nortel stock jumped another $16 yesterday in Toronto to close at $150.75. In New
York, the stock rose 12% to $104.24 (US). The TSE announced yesterday the relative
weight of Nortel will be increased in its main composite indexes, including the TSE
300, to reflect the increase in the float shares of the company. That has boosted demand
from funds whose portfolios match the indexes.
There's still work to be done to make Nortel the agile and effective supplier of every
aspect of networking that Mr. Roth envisages. In a memo to employees Nov. 12, he
outlined the steps Nortel is making to incorporate services into its product groups.
That's because customers are demanding more from Nortel now than just equipment.
"Now, our customers are coming in and saying, 'I'm not competent to build the network
and I don't have to.' A big change in what our customers expect of Nortel is underway.
We now have to design, build, install and in some cases operate pieces of the network,"
he said.
"That's a very different way of doing business," he continued. "We're already doing
that, but we need to do more of it. I wouldn't say it's uniform yet across Nortel and we
aren't as proficient at it as we will be." |
