Nortel's (latest) crash

How fast hope crumbles.

In June, Nortel was painting a rosy picture at its user conference [1]. Nortel CEO and President Mike Zafirovski said the business was back on track and on the right trajectory for continued growth and improvements. According to Mr. Z, two years of transformation had taken root and yielded earnings, a better cost structure, and rebuilt leadership and its employee's faith in the company.

Today, about six months later, Nortel posted its biggest loss in seven years and is cutting back 1,300 jobs. The company posted a third quarter loss of $3.4 billion, including a $3.2 billion expense to write down the value of part of its business and deferred tax assets.

Nortel had a vision to move out of the hardware arena and become more software and applications orientated.  In August, the company acquired Pingtel - now there's a snake-bitten company if there ever was one - and 3D positional voice technology company DiamondWare.  Things seemed to be looking up as the company leveraged its relationship with Microsoft to extend its presence in the unified communications workspace and presented a growth path for its optical networking gear from 40G to 100G. Things were looking up.

Instead, as a part of a further reorganization - OK, what did you tell me in June, Mr. Z? - to save $400 million next year, travel has been frozen, salary increases have been ended, and four executives are being shown the door. 

Among the departing on January 1 are CTO/Blogger John Roese and Chief Marketing Officer Lauren Flaherty. Roese coined and popularized the term "hyperconnectivity" and was big on promoting UC, one of the few bright spots Nortel had. Now he's working on his resume.

Will Mr. Z be next?

Compounding matters further, Nortel wants to unload its Metro Ethernet division, but everyone knows it and the global market downturn has reportedly driven the potential price in half.

Will Nortel survive as an independent company? It's hard to say, but the odds today don't look too good.

- Doug [2]