Enterprise customers react to Nortel bankruptcy

Nortel’s enterprise customers are standing behind the company despite its decision to file for creditor protection this week, according to the head of its international user group.

The International Nortel Networks Users Association (INNUA) represents more than 4,000 members and released a public statement late Wednesday pledging its support for the troubled network equipment maker, which filed for Chapter 11 bankruptcy in the U.S. admid a deadline to pay a US$107 million bond on Thursday.

“INNUA believes Nortel’s decision will afford the company the opportunity to truly focus on strengthening the business to meet Nortel customers’ current and future communications needs,” the statement said.

Victor Bohnert, INNUA’s executive director, said customers have known for months that Nortel was evaluating all its options, but it was not aware of the decision to file for creditor protection ahead of time. However Nortel hosted a conference call with INNUA shortly after making the announcement, he said.

“The decision they made was a strategic one, and it was made with the customers in mind,” he said. “It’s all about the difference between people feeling credit protection means you’re going away or that it means protecting yourself from your creditors to get back on your feet.”

Nortel has already worked out an agreement with Flextronics, its primary logistics partner, to ensure its supply chain will continue uninterrupted in the short term, Bohnert said. That means an enterprise that was waiting on an order should still expect to get it.

“Nortel customers should not see an immediate negative impact,” he said, although he admitted there may not be an indefinite time for ordering and receiving Nortel products. “Clearly changes will continue to come about for Nortel, but the day-to-day operations of our member companies would not be affected right now.”

While Nortel has gone through several rounds of layoffs, attempts to sell its Metro Ethernet unit and a WiMax deal with Alvarion to get itself back on track, Bohnert said the user community is stronger than ever.

“Even over the course of the economy in the past year, we saw an increase in our membership and an increase in many of our programs,” he said. “We have a conference scheduled in June, and although it’s still early days we’re actually at this point seeing an uptick (in registrations).”

Nortel’s executive team has touted its partnership with Microsoft and its unified communications portfolio as a key opportunity for growth, and Bohnert said INNUA members are rapidly adopting the technology. This reflects a trend with Nortel for waiting for a market to take off and then aggressively pursuing it, said Zeus Kerravala, an analyst with the Yankee Group.

“I don’t necessarily think of Nortel as being all that innovative,” Kerravala said. “Nortel would see a market and then would enter them with really good products. Just a little bit late.”

Bonhert said he realized some customers may be jittery over the bankruptcy announcement.

“Now is not the time to be out there over-reacting to the news of today,” he said. “This is a business strategy that will allow Nortel some room to reorganize.”

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