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The Americanization of Nortel

April 30th, 2005 | 3 Comments | Posted in Main Page

If you didn't get a chance to read my column in the National Post this week - and still have an appetite for Nortel news - here's some weekend reading material on how the company seems to be less Canadian these days.
Is Nortel Networks Corp. in the midst of being Americanized?
It is a legitimate question given the only Canadians on the overhauled senior management team are chief financial officer Peter Currie and chief research officer Brian McFadden. The rest of the team lives in places such as San Diego, Seattle, San Jose and New York when they are not flying around the world.
In recent years, Nortel's Canadian operations have shrunk with the sale of manufacturing plants in Calgary and Montreal, while there have been major job reductions in Ottawa and Brampton. As much as we like to see Nortel as the country's flagship high-tech company, it is gradually losing its Canadian identity. There are still 10,000 employees here but Nortel doesn't seem as Canadian as it used to be.
This reality hit home earlier this week when Nortel spent US$448-million to acquire Fairfax, Va.-based PEC Solutions Inc., which provides systems integration and consulting services to the U.S. government. One of the key points made by executives is the deal will see a U.S. entity established so Nortel can bid “unfettered” for U.S. government contracts. While security issues are a big consideration post-9/11, it is strange to see Nortel's Canadian roots as a negative.
That said, you can argue that Nortel has no choice but to becomes less Canadian and more global if it wants to stay competitive in the telecom equipment market. But Nortel is a different beast because it has to balance the need to leave the roost with its Canadian heritage. This company was nurtured and supported in Canada through vehicles such as low-cost loans and R&D credits.
As a unit of BCE Inc., Nortel thrived by having a captive buyer to support new research and product development. Over the years, the Canadian government provided Nortel with plenty of financial support to do business. Even today — amid the fall-out of the company's accounting scandal and painful financial restatement — Export Development Canada has remained on board.
The key question is whether Canada will be rewarded for its loyalty. At the end of the day, will Canada continue to play a vibrant part in Nortel's business? The troubling scenario is Nortel could become the next JDS Uniphase Inc., which has nearly disappeared from the Canadian landscape, having employed more than 10,000 people in Ottawa during the telecom boom. While JDS Uniphase is still around, its headquarters are now based in San Jose, Calif.
For those who dismiss the idea of Nortel phasing out its Canadian operations as remote or foolhardy, keep in mind the company is starting to shift R&D activity to lower-cost countries such as China and India. Earlier this month, Nortel invested US$10-million for a stake in India's Sasken Communication Technologies Ltd., which does R&D outsourcing.
If Nortel wants to be really bold, the next move will be the relocation of its headquarters to the United States from Brampton, Ont. — a move that could be sold by positioning it as a decision to operate co-headquarters in Canada and the United States to “meet the needs of customers.” It makes sense given many of Nortel's senior executives are American, and it would be easier if they didn't have to cross the border to visit the office.
As it stands, the idea of co-headquarters is probably untenable because Nortel still needs the Canadian government's support. If, however, the senior executive ranks continue to be dominated by non-Canadians, the issue could receive serious consideration. Perhaps the fear of Nortel leaving town is simply a case of paranoia but anything is possible. Rember, you heard it here first.
© National Post 2005

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Nortel Files 10-K

April 30th, 2005 | No Comments | Posted in Main Page

As it promised, Nortel filed its 10-K
by the end of the April with the SEC. But no one gets to see the actual
numbers until early Monday morning. This leaves analysts - and the
media - with just a couple of hours to pore through the document before
an 8 a.m. conference call. Not that I'm an expert in investor relations
but this whole “file late Friday night but you can't get the numbers
for another 60 or so hours” seems unorthodox. Given the accounting
scandal, you know Nortel wants to dot the “I's” and cross the “T's”
before it releases any financial information. But it also has to
balance its internal needs with the expectations of the investment
community. There were assumptions the financial results would be
available some time during the last week of April. Nortel only
disappointed people who don't need any more ammunitiion to dismiss how
it operates. That said, Nortel management has the right to do things
the way it wants - even if does piss people people off. From my
perspective, the company's behaviour is puzzling but far from
maddening. Nortel's got far more pressing and troubling strategic
challenges than making sure it gets financial results out on time.

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Firefox Hits 50M Downloads

April 29th, 2005 | No Comments | Posted in Main Page

Firefox looks like it's for real if 50 million downloads mean anything. Apparently, the newest alternative browser has 10.3% of the browser market while IE has dropped to 83.1% from 84.8% since the beginning of the year. If I could be so brave to make a suggestion to the Firefox development community, it would be to provide multiple pre-configured versions: lite (with no extensions), medium (some basic extensions) and large (lots of extensions for newbies).

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8×8 Thinks $99 is Great

April 29th, 2005 | No Comments | Posted in Main Page

An intriguing exercise is trying to read into 8×8 Inc.'s decision to keep the price of its Packet8 VideoPhone at at $99 following a promotional program. 8×8 said the decision is prompted by “favorable consumer demand” to a plan that is part a $19.95 a month, two-year service contract. The key question is how much of a hardware subsidy 8×8 is offering to attract consumers. The company believes the two-year contract concept is the right way to go given its success in the wireless phone business. Maybe this is the right way to go for 8×8, which was recently rated as offering the highest quality VOIP service. With competition mounting from all sides, 8×8 needs a competitive edge to stay viable. Otherwise, it will be destined to be a niche player - if it already isn't.

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Rogers-Primus Technical Issues?

April 29th, 2005 | 2 Comments | Posted in Main Page

According to Rogers Cable's Michael Lee, there are problems with Primus Canada's VOIP software - which could account for QoS issues. QoS is becoming a bigger issue as VOIP service providers such as Vonage complain their packets being blocked to de-prioritized by broadband network operators. Lee said there are no regulations to stop this kind of behaviour, and currently no plans to implement packet prioritization policies. It is interesting Lee gave Rogers with some wiggle room in the future to do tiered service if push comes to shove. While it's tempting for a carrier or cableco to favor their own applications and services, the best product should be allowed to rule the roost. If Rogers' VOIP service, which will come out by “mid-year”, can't compete with Vonage, then Rogers needs to improve its offering. The silver lining for any network provider is the consumer has to pay them for the broadband connection, which gives the provider the opportunity to promote Web-based services and applications, including voice.
On another VOIP note, PC Magazine's Lance Ulanoff is getting some flack and some praise for a column he wrote on why he doesn't have VOIP at home. He cites reasons such as 911 access, local number portability and the chance of a power outage. While I have VOIP in my office, I haven't switched over in my home. Why? Perhaps the biggest reason is the cost of telephone service is reasonable in Canada so I haven't been totally swayed by the marketing messages of VOIP yet. Another reason is the aggravation of switching carriers given how busy our lives are these days. While I can keep my existing number, I'm not sure my wife would be thrilled if we had to survive on using a cell phone until our number was ported over.

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Nortel Talks Numbers

April 29th, 2005 | No Comments | Posted in Main Page

While Nortel will file its 2004 fourth-quarter and annual results today with the SEC, analysts will have to wait until 8 a.m. Monday for a conference call with CEO Bill Owens and CFO Peter Currie. It is certainly not the best scenario for analysts who likely have to spend the weekend pouring over financial statments - if they are actually available - to prepare for the conference call. To appease the analyst community, Nortel would do itself a lot of good by holding a lenghty call to allow for plenty of questions. The 25-minute, four-question conference call earlier this week to announce the US$448-million acquisition of PEC Solutions Inc. left much to be desired. Perhaps Nortel is so focused on internal processes, it has lost touch with external perception. It's out there and it's becoming a factor if the Nortel's failure to win any of the US$19 billion BT contract is any indication.

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BT: $19B; Nortel & Marconi $0

April 29th, 2005 | No Comments | Posted in Main Page

BT Group - formerly known as British Telecom - unveiled its eight preferred suppliers for a five-year, US$19-billion contract today for a new high-speed Internet network. It was good news for Cisco, Lucent, Siemens, Huawei, Ericsson, Fujitsu, Ciena and Alcatel. It was bad news, however, for Nortel, which watched Ciena and Huawei win the optical business. It was terrible news for Marconi, which generates 25% of its revenue from BT. Marconi shares tumbled as much as 39% today once investors got over the shock of Marconi's exclusion.. For Nortel, the troubling news is Huawei's inclusion in the group of eight. Huawei is emerging as legitimate and viable technology choice for carriers rather than being rregarded a low-cost supplier. Of course, Huawei's growing credibility could be bad news for Cisco and Juniper down the road.

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Nokia vs. iPod

April 28th, 2005 | No Comments | Posted in Main Page

Apparently, Nokia thinks it has done the unthinkable by developing the iPod-killer. The mobile device maker will offer a cell phone with a 4GB hard disk that can store 3,000 songs. In theory, it sounds like a great idea, and it would be even better if they also offered a calendar and calendar software and a camera. Of course, it would be easy to respond to Nokia's competitive cheekiness by adding a phone to the iPod. How about a deal between Virgin Mobile and Apple? The combination of two cool brands and visionaries - Steve Jobs and Richard Branson - could be awesome. That is, if Jobs can play nice, which seems a challenge given his battles against bloggers and John Wiley & Sons, which had all of its books turfed out of Apple stores because Jobs was pissed about a new biography on him called “iCon Steve Jobs: The Greatest Second Act in the History of Business”.

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Today's the Day for Nortel…Actually, No!

April 28th, 2005 | 1 Comment | Posted in Main Page

There are rumblings Nortel may release its 2004 fourth-quarter and annual results laster today. Then again, it may wait until after the markets close tomorrow so it can get analysts even more upset. It's puzzling why Nortel insists on setting these kind of internal deadlines. All they do is create expectations that hurt you if you fail to meet them. During my short and rather undistinguished tenure as a dot-com entrpreneur, my boss ( and friend) sent me to a personal organization course where they taught you to set priorities, etc. The one lesson that resonated with me was “under promise and over deliver”. You tell people something will be done by Wednesday, and they're thrilled if you deliver it Tuesday night. Maybe Bill Owens should take this course. I can give him the telephone number.
Update (5 p.m. Thursday): Nortel will not file its numbers until after the markets close tomorrow. This doesn't mean the numbers will be available Friday but that Nortel will submit its documentations to the SEC. It could not be until Monday morning that Nortel's numbers are released for public consumption. Let's hope it holds a lengthy conference call rather than following recent practice of a four-question, mini-session that leaves people with more questions than they began.

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AOL Canada Drops VOIP Prices

April 28th, 2005 | No Comments | Posted in Main Page

AOL Canada - citing “increasing subscriber demand” - recently dropped the prices of its two VOIP plans. Truth be told, AOL is really responding to market conditions so it can stay competitive with Vonage, Primus, Comwave and BabyTel in the non-facilities based VOIP market. While AOL Canada executives have enthusiastically disagreed with me on their pricing strategy out of the gate, their Optimum and Optimum Plus packages were too expensive copmpared with many rivals. With a $5 reduction to $29.95 and $39.95 respectively, Optimum and Optimum Plus are have become more reasonable but if I was looking for bang for the buck and a strong brand name, I'd still go for Primus or Vonage.

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