Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (43044)	2/13/2006 3:13:31 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67845

Will Nortel invent its way back? Humbled, poorer, it can't just buy innovations Firm's future may sprout from its origins — the lab Feb. 13, 2006. 01:00 AM PATRICK EVANS BUSINESS REPORTER Aside from grabbing headlines, just what does Nortel Networks do? Last week the Canadian-born telecom giant announced it was trying to nail down a potential $2.4 billion (U.S.) settlement on two major class-action lawsuits that resulted from allegations of accounting improprieties. It's a chance for the 110-year-old company to put some of its recent troubles behind it and get on with business. Dion Joannou, president of the company's North American operations, offered the Star a plain-English account of exactly what that business is. Nortel offers a consumer product so widely used it could almost claim celebrity status. "If you go to most doctors offices or banks or hotels you'll see a very recognizable black phone," Joannou says. "That's the Nortel phone." But the company is much less visible in the bulk of its operations: providing offices around the world with what Joannou calls "enterprise products." "We define an enterprise as a business or campus-type environment," he says. "They have internal networks where they move data or voices around. We sell the equipment that will work inside an enterprise." Networks: it's about phones, Internet, and how computers within an organization interact with each other. "We'll go in and put the whole network in — hardware, software, as well as the installation services, the maintenance services, and integration services." It's a low-glory job, Joannou says. "One of the reasons we're not a household name (is) most of our revenues are actually with the large carrier customers supplying the world class networks." Among these are Nortel customers Bell Canada, Telus, Sprint and Verizon. "We are the secret source behind those networks and don't get a lot of credit for it from the general public." But if it sometime labours in obscurity, Nortel's reach nonetheless extends far and wide. The company provides the network infrastructure and equipment for some of the world's largest stock exchanges, including the NYSE. "The 10 largest universities in North America rely in one way or another on Nortel equipment," Joannou says. "The same applies for the top 20 airlines. And most of the major financial institutions and hospitals work on Nortel networks." And Joannou says the majority of Internet traffic in North America flows through what he calls Nortel's "fat pipes" — the high bandwidth networks that transport the data all around the country. "Today we function in over 150 companies. About half of our revenue comes from international markets now, outside North America. We are a company of around 30,000 people, and 12,000 of those are engineers." Joannou says Nortel, moving into 2006 with new CEO Michael Zafirovski at the helm, is looking to expand. A deal closed at the end of last year will see South Korea come within Nortel's reach. The nation has the world's most advanced broadband market, Joannou says. But it's also a closed market — the people who provide the equipment have to be South Korean. "We made a decision to enter into a joint venture with (Korean manufacturer) LG Electronics for their infrastructure business," Joannou says. "That allows us access into the Korean market." But it's also an opportunity for Nortel to expand. "We can use the technologies developed there, and the learning, all around the world." And just last week Nortel announced it will team up with Huawei Technologies Co. Ltd., a major Chinese competitor, to develop "ultra" broadband — converged data, video, voice and wireless services. The venture will mix Nortel's voice and broadband networking technologies with Huawei's broadband access products. Asked what Nortel does in this day and age, Iain Grant, managing director of Seaboard Group Inc., a research and consulting company, replied, "I wonder if anybody knows. I suspect that is the very crux of the question their entire management team is struggling with right now: Where do we go? What is our niche?" The objective that has run through all of Nortel's 110 years in business, Grant says, has been connecting one person to another. But the means for that are forever changing, forcing the company to constantly "expand, shift and reinvent itself." Grant says a lot of that reinvention is happening in Nortel's research and development activities. "We saw Nortel go into a huge buying spree in the late 1990s, buying ideas wherever they could find them." One example was the $14 billion takeover of Bay Networks, a California-based Internet technology firm. But Grant says the bursting of the tech bubble and subsequent allegations of accounting improprieties diminished the company coffers. "Nortel doesn't have the money or the stock to buy ideas these days. So they have to go back to their original (ways) — thinking; inventing in house. "Nortel has shifted back to being more of an engineering shop as it tries to invent its way back into the good graces of financial analysts." Assuming it can pull this off, Grant says the products Nortel provides will always be in flux. He can even imagine the company getting into "the matter-transfer" business 50 years from now — as in Star Trek-style teleportation. Or Norteleportation. "Beam me up, Scotty," Grant adds.