notrel networks case study
TRANSCRIPT
![Page 1: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/1.jpg)
NORTEL NetworksNORTEL Networks Case Study
Chief Strategy OfficeChief Strategy Office
![Page 2: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/2.jpg)
Outline
■ Nortel Overview■ Nortel Overview■ Nortel’s Decline & Fall■ Recent events■ Recent events■ Our Proactive approach■ Summary■ Summary
Confidential , not for distribution
![Page 3: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/3.jpg)
NORTEL Overview
■ Founded at 1914■ Founded at 1914■ Headquarters in Toronto, Canada ■ 33K Employees (before recent layoffs)■ 33K Employees (before recent layoffs) ■ $10Bn 2008 revenue
2008E Sales by Product Line 2008E Sales by Geography
41%
18%
16%
53%25%
16%6%
25%
Carrier Enterprise GS MEN
25%
NA EMEA APAC LA
Confidential , not for distribution
![Page 4: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/4.jpg)
Decline & Fall
2001/22003:
20052000: Wrong Technology bet
expensive M&A’s
2001/2: Revenue drop,
Losses, Huge Layoffs
Signs of recovery and
going backto Profit
2004: Financialreporting
2005: New initiativesovershadowed
by lossesSlowing growthand key personnel
abandonment
Huge Layoffs& Managers
churn
to ProfitR&D offshore
New Opticalproducts
gmess….
CFO leavesCEO fired!
by losses,lawsuits
and CEOreplacementp p
Revenues ($Bn)$3.2Bn for Xros
$7.2Bn for Alteon
20
25
30Out of DSL Closing
XrosBack to
DSLFailing DSL
0
5
10
15
Terabit Router
Stoping Terabit Router
Ignoring IP/MPLS Wimax
Confidential , not for distribution
02000 2001 2002 2003 2004 2005 2006 2007 2008
![Page 5: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/5.jpg)
Decline & Fall Continues…
2006: New CEO 2007: 2008appoints newmanagement
and a new visionwhile cutting costs
2007: Offensive
movesto get back
2008: Focus change
from IPTV to opticalwhile cutting costs
and selling nonstrategic product
lines
on track in lightof continued
SEC problems
to opticaltransport
Revenues ($Bn)$3.2Bn for Xros
$7.2Bn for Alteon
20
25
30Out of DSL Closing
XrosBack to
DSLFailing DSL IPTV PBT
0
5
10
15
Terabit Router
Stoping Terabit Router
Ignoring IP/MPLS Wimax
UMTS Sold to
ALU
Confidential , not for distribution
02000 2001 2002 2003 2004 2005 2006 2007 2008
![Page 6: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/6.jpg)
Recent Events
9/2008: MEN division for sale
11/2008: Decentralization…
1/2009: Chapter 11
Decentralization
MEN announcement Chapter 11
Confidential , not for distribution
![Page 7: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/7.jpg)
Recent Events
9/2008: MEN division for sale
11/2008: Decentralization…
1/2009: Chapter 11
Approaching Nortel’s Tier-2/3 customer base, proactively, with plans / tenders for NG networks
Recruitment of services personnelAddressing Nortel’s partnersp
Offering Nortel’s customer base replacement of their legacy equipment
Addressing Nortel s partners
q pOffering Nortel’s customers maintenance / managed services for the existing install
Confidential , not for distribution
services for the existing install base
![Page 8: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/8.jpg)
Summary
■ Nortel’s fall begun in 2000■ Nortel s fall begun in 2000■ Accelerated fall in 2008■ Constant monitoring of every move■ Constant monitoring of every move■ Tracking key competitors with the similar core
businessesbusinesses…■ … but be ahead of your competitors■ Proactive approach■ Proactive approach
Tiger, Tiger, burning brightIn the forest of the night…
Confidential , not for distribution
![Page 9: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/9.jpg)
![Page 10: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/10.jpg)
Nortel Revenue Breakdown
MEN Sales Breakdown ($m)
55 7862
200250300350400
305 300 255
050
100150200
Q3 2007 Q2 2008 Q3 2008Q Q Q
Optical Networking Data Networking and Security
■ MEN 2008 revenues are ~ $1.6Bn■ Optical networking sales are declining at 15% q/q p g g q q
and 16% yr/yr [we suspect that customer churn has already begun]
Confidential , not for distributionSource: Global Insight
![Page 11: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/11.jpg)
Decentralization
■ On Nov 11th 2008 ; Nortel issued Q3 results■ On Nov 11th 2008 ; Nortel issued Q3 results announcing:■ Operational cost cutting aimed to save $400m on 2009g■ Decentralization of several business functions and refocus
around vertically-oriented business units: Enterprise Solutions; Carrier Networks and MENSolutions; Carrier Networks and MEN.
■ R&D, marketing, sales, services, and operations will all be decentralized into these vertical business units.
■ Workforce reduction of ~1,300 people (25% on 2008 & the rest on 2009)
■ Executive departures due to the decentralization process■ Executive departures due to the decentralization process
To our view the decentralization process was aimed towards selling assets rather than keep the company as an intact entity
Confidential , not for distributionSource: Nortel 3Q08 Press Release
selling assets rather than keep the company as an intact entity.
![Page 12: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/12.jpg)
Chapter 11
When a business is unable to service its debt or pay its p ycreditors, the business or its creditors can file with a federal bankruptcy court for protection under Chapter 11I Ch t 11 i t i t th d bt i i t lIn Chapter 11, in most instances the debtor remains in control of its business operations as a "debtor in possession", and is subject to the oversight and jurisdiction of the court. The courtsubject to the oversight and jurisdiction of the court. The court can grant complete or partial relief from most of the company's debts and its contracts.Sometimes, if the business's debts exceed its assets, the bankruptcy restructuring results in the company's owners being left with nothing; instead the owners' rights and interests areleft with nothing; instead, the owners rights and interests are ended and the company's creditors are left with ownership of the newly reorganized company.Source: Wikipedia
Confidential , not for distribution
Source: Wikipedia
![Page 13: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/13.jpg)
Global Partners
■ Approach Nortel partners■ Approach Nortel partners http://app89.nortelnetworks.com/partnerlocator.asp
Confidential , not for distribution
![Page 14: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/14.jpg)
Potential Negative Outcomes for NortelNortel
■ Most vendors have already begun seeing Nortel less and■ Most vendors have already begun seeing Nortel less and less as a threat in light of a history of weak financials, restructuring and layoffs
■ Under Chapter 11 Nortel’s competitive position will be■ Under Chapter 11 Nortel s competitive position will be extremely vulnerable across all of its product lines and businesses
■ Customers will question Nortel’s ability to meet their long-term networking and communications systems needs
■ Customers will lower their purchases until they see if the■ Customers will lower their purchases until they see if the buyers just want to gain market share or be able/want to deploy / support / improve Nortel’s product lines E i ti t t i t d l i bl■ Existing customers are certain to delay sizable investments
■ Demoralizing effect on personnel
Confidential , not for distribution
g p■ Previous restructuring failed to bring Nortel back on track
![Page 15: Notrel Networks Case Study](https://reader034.vdocument.in/reader034/viewer/2022042814/55280915497959710b8b46a3/html5/thumbnails/15.jpg)
Potential Negative Outcomes for NortelNortel
■ Customers have long term uncertainty regarding■ Customers have long term uncertainty regarding which product lines are going to remain under Nortel
■ OPEX cuts, especially R&D, will hurt product■ OPEX cuts, especially R&D, will hurt product competitiveness and consequently push customers to look for alternative vendors
■ Global services – Carriers using Nortel’s application services and managed services may question the bilit t i t i th l l f i i li ht fability to maintain the same level of service in light of
the decentralization process of the GS into the business unitsbusiness units
■ Customers relying on Nortel alone should establish a secondary supplier relationships
Confidential , not for distribution
secondary supplier relationships