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

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.

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).

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.

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.

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.