Nortel Networks is in a heap of trouble. The networking vendor just announced plans to terminate 1,300 workers and prospects for growth are thin after posting a net loss of US$3.4 billion for the third quarter.
While I don’t believe in layoffs as a business strategy, I certainly understand why Nortel is doing this. They have to stop the hemorrhaging and the fastest way to do so is by reducing a company’s biggest cost base: headcount.
However, Nortel has other, more pressing problems. The market is not that bullish on Nortel these days. Two fairly significant solution providers (one from New York and the other in Europe) told me that they don’t expect Nortel and Avaya to survive this economic downturn.
I wouldn’t go so far as to predict that, but those statements tell me that Nortel is becoming less relevant in the marketplace. I think the reason for that is that Nortel has not firmly committed to the channel.
Commitment to the channel is not a 50-50 proposition. In CDN’s recent channel chiefs issue, Nortel did not want to publicly disclose how much channel business they do. However, my sources put it at 40 to 50 per cent. Again, that is an unconfirmed percentage.
A real commitment in my mind is 75 to 80 or more. David Wilkinson, Nortel’s channel chief, has to make this happen to grow the company’s revenue. And he has to start now, before the market decides for Nortel.
If Wilkinson is allowed to pass on lucrative direct accounts to the channel he can bring onboard some terrific partners to help him grow the business. I’m not saying Wilkinson has to do this overnight. But it has to start today. The direct model is no longer an option, especially with more staff being laid off. If that occurs then who is going to sell direct? And, more importantly, who is going to support that business?
The writing is on the wall for Mike Zafirovski, the CEO of Nortel, and for Wilkinson. The time to act is now. It’s time for Wilkinson to save this company from itself. Only he is in a position to do it. If he can’t change those direct-leaning minds at Nortel, then this great Canadian company could become another 3Com.
A lot of Nortel quick hits today, plus one non-Nortel appointment.
Nortel CTO John Roese will be leaving the company in January. Chief Marketing Officer Lauren Flaherty, Global Services president Dietmar Wendt and executive vice-president of global sales Bill Nelson will also leaving Nortel.
And here is the non-Nortel appointment: David Graham, a 30-year veteran of HP Canada, is going Cell-A-Net Inc., a Printer Services firm based in Mississauga, Ont. as its new Printing Solutions Specialist.