Nortel finding some stability

Late last month, Nortel Networks quietly restructured its operations into two product groups and four regional sales groups. Included in the restructuring was the departure of Malcolm Collins, who had headed up Nortel’s enterprise unit since 2003.

Just a year ago, such a shakeup would have been viewed as another sign that the troubled network equipment maker was still struggling to find its footing after a well-publicized accounting scandal and high-level executive departures. The fact that the latest reorganization and Collins leaving the company raised no eyebrows is a good sign that Nortel has managed to regain at least some of its former reputation as a dependable maker of networking products.

Nortel could certainly use some good news. In late 2003, the company was rocked by an accounting scandal that resulted in Nortel restating its results for 2000, 2001, 2002 and the first two quarters of 2003.

Nortel was also late filing its 2004 annual report and didn’t manage to catch up on its financial reporting until this year.

Then last June the company’s president and chief operating officer Gary Daichendt and chief technology officer Gary Kunis resigned after only three months on the job. Both had been high-profile hires from Nortel competitor Cisco.

Nortel’s been able to shunt aside some of the negative vibe around the company with solid, if unspectacular, financial results. For the second quarter of 2005, Nortel reported profits of US$45 million on US$2.86 billion of revenue — up 10 per cent from the second quarter of 2004.

Perhaps an even bigger positive was that Nortel managed to boost its enterprise network revenue by 26 per cent in the second quarter, compared to the year prior, up to US$730 million.

Nortel clearly doesn’t carry the same cachet it did back in the late 1990s when the firm was considered one of Cisco’s primary competitors.

Nortel’s enterprise data offerings have lagged behind, especially in the area of routing.

Nortel CEO Bill Owens has suggested the company may look to partner to fill out its routing portfolio.

But Nortel is strong in other areas. The company’s Succession line of IP PBX products competes strongly with offerings from Cisco and Avaya. Its VoIP handsets, unified messaging products and application switches also sell well in the enterprise.

Nortel’s wireless carrier gear is also selling well. The company has recently won a number of major contracts for 3G mobile voice and data network offerings with overseas carriers such as Orange France and Telefonica Moviles Espana.

Nortel is nowhere close to becoming as popular and pervasive as Cisco in the enterprise, but then again neither is any other networking company.

The fact that Nortel seems to have found its legs, is producing leading edge products, especially in the VoIP arena, and can serve as an alternative to Cisco in many RFPs should be enough to keep most enterprise network managers happy.

QuickLink: 052986

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