Chinese Carriers Cutting Back
November 3rd, 2005 Posted in Nortel Networks, Telecom Equipment Makers
For telecom equipment makers (Alcatel, Nortel, Lucent?) who have pinned their hopes on China, they would be wise to not ignore opportunities closer to home. A report by Infonetics suggests capital spending in China will decline 3% in 2006, mostly due to a slow down in the wake of massive build-outs. “The capital intensity for Chinese carriers was over 30%, which is an unsustainable ratio,” said Kevin Mitchell, a principle analyst with Infonetics. Meanwhile, capex in North America, Europe and Asia Pacific will grow 6% this year to $190 billion with similar growth expected in 2006. Most of the spending gains are focused on investments in next-generation technologies such as packet voice, broadband and metro Ethernet. A telling tale of the economic reality of breaking into new markets is Nortel's $500 million deal with BSNL. In theory, it is supposed to give Nortel a foothold in the fast-growing Indian market. To date, however, it has only given Nortel plenty of pain and red ink as losses have totaled $286 million on sales of $226 million. Even worse, it appears BSNL has an option to buy another $250 million of wireless equipment, which could mean even more losses for Nortel.
November 3rd, 2005 at 9:21 pm
Everyone is cutting back on Nortel, actually looks like they are avoiding them like the plague, Cingular, British Telecom, Vorizon, BSNL, and even companys in their own back yard like Sprint Canada, and Bank of Montreal who just ripped out all their Nortel gear and replaced it with Cisco's, etc… it's bad… this is why I wonder where they are increasing revenues from, assets sales, past receivables, paying those still willing to do business with them even more judging by decling margins… who knows, they arn't exactly pinicles of transparency and honesty with the same people there hiding behind silence and weak internal controls while still paying bonuses =)
I have composed some point forms to assist investors look at the recent historic trends of Nortel and called it “Introduction to Nortel 101″ or “Nortel 101 for the Retention challenged” =)
Perhaps a good read for a few in light of how the market responded to the fire selling headquarters to Rogersahich we expected and where NT is now a tenant as they await their sexy “sales studio” what ever the heck that is… =) Heh, imagine how this retention challenged market will repsond the endless other events we anticipate like criminal charges, debt repayment, fines, fraud damages, let alone the multiply more suprises we keep getting bombarded with.
Nortel 101 For the Retention Challenged:
1-bad news ongoing/endless 2-Admitted Fraud sued for $9 billion in U.S. 3-2004 lowest sales since mid 1990's 4-2005 losing even more earnings 5-$6.6B debt now 6-cash rapidly declining at 3 billion, if that 7-ALL gambles/Ventures confirmed failing so far 8-BSNL lost leader with further 5 billion tendered to lower cost competitors now 9-Noika is in with Putian and NT is out 10-LG earnings decline 70% last quarter 11-analysts “hate” PEC $448M deal with $15M declining returns and losing eanings since 2002 12-$1.3B Debt to pay February 13-High profilers Daichendt-Kunis-Deroma-Collins-Owens all SUDDENLY/ABRUPTLY depart 14-Gary's slander not dismissed bY NT 9-New axeman CEO with grudge sued by ex-employer who passed him by to tripple profits since he left 10-Headquarters firesold to Rogers 11 cutting almost 70% R&D 14-firesold manufacturing with ongoing delays in payment 15- never made money/ traditionally disappoints 16-always trades at a premium 17-losing marketshare 18-margins decline 19-shrinking 20- contradict optimism 21-resigned plea bargained board deny obvious red flags for cash they approved and received 22-visited stoic SEC 23-SEC fines 24-majority still there “diffcult to find” 25-Stalled for a almost year and a thousand accountants in silence, then suddenly changed “dissatisfied” numbers last minute 26-filed under de-listing threat 27-investigation by RCMP/OSC/SEC/DOJ/FBI 28-after fired CEO,CFO,& Ctrl. months later fired 7 more on criminal probe 29-OSC forced bad news 30- fraud validates older lawsuits 31- 1st restatement should be even more reliable 32-2nd remains unreliable 33-dilutes shares 34-board gets 3 yrs. to repay bonus 35-No one does busines with them anymore like Cingular, Vorizon, BT, BSNL etc… 36-lost BT $19B tender used everyone but NT 37-Even Cdn. companies won't buy like Sprint Canada, BMO, 38-almost went bankrupt (most do thereafter) 39-Nortel suing ex-employees 40-costs too high 41-high severence with more to come 42-NT used past leaders to combat Ottawa and Washington 43-shareholder & employees suing them 44-criminal results not priced in 45-institutions require several successful quarters and SEC approval 46-no credibility 47-worse off now than ever 48-they shrink, peers grow 49-Too many suffer to lies 50-still bonus happy 51-insurance recinds coverage 52-corporations hoarding cash at 1959 record levels 53-Orders unethically bid & below cost 54-Telecom downgraded 55-only end user inreasingly benefits 56-ongoing lower prices 57-Asian competition moving in 58-LU/CISCO eating their pie 59-hype in desperation 60-customer mergers hurt 61-No more big orders 62-measly orders EDC financed 63-Analysts see financing to zero 64-fraud effects customers 65-Staff de-motivated 66-bloated by those holding from fraud rally 67-accounting costs 68-legal fees 69-accounting software 70-ad costs to sell shares not product 71-bad reputation 72-bad cash flow 73-exports jobs for losing orders 74-20% of workforce gone 75-Q205 hid bad news 76-ambiguity in disclosure 77-Mr. Z defrauded/sued 78-supported human rights violations/enemy spys/fixing votes&losing bids 79-restructuring directionless 80- linear death spiral 81-unproven board members 82-wireless decline 83-ruined market 84-near 52 week low 85-horrid outlook 86-bad fundamentals 87-poor ethics 88-no credibility 89-closing campuses 90-CEO turnstile 91-high pensions to insiders 92-exhaustive “risks and uncertainties” 93-Moodys warnings transpiring 94-nothing corrected95-endless surprises 96-criminal charges expected 97-NT mute on Collins departure 98-Deroma legal chief suddenly retires before their bigggest lawsuit 99-post disaster Kerr stepped down before numbers 100-Lawsuits consolidated in the U.S. 101-fixed & cooked bonuses with weak controls is worst not better
(This is grossly abbreviated too, lacking elaboration due to size restraints on the NT's Yahoo message board)
November 3rd, 2005 at 9:27 pm
Furthermore, BSNL just snubbed Nortel by offering low cost competitors in on a bid 10 times their lost leader quoted at 5 billion dollars!
Severes them right for screwing up the sector and setting the specs requiring BSNL to only accept 10 years international experience in an order they furnished below cost. I jear Huawei will be bidding, Huawei's growth is staggering:
”
Huawei is now the largest telecom vendor in China's telecom market and is quickly becoming a leading player in the global telecom market.
Currently Huawei has 24,000 employees and sales in 2004 reached US$5.58 billion, a year-over-year increase of 45 percent and international sales have been doubling each year for the past five years.
More recently, Huawei says it is already more than half way towards its full-year target of $8 billion.(Its revenues for the first half of 2005, $4.1 billion.)
Huawei is also enjoying its new role as a primary supplier in BT. Huawei also plans to triple Euro Business.
Headquartered in China, Huawei Technologies specializes in the R&D, production and marketing of telecoms equipment, providing customized network solutions in fixed, mobile, optical, data communications networks, software & services and terminals.
As an international telecom equipment vendor, Huawei offers total solutions in the fields of wireless network, fixed network, optical network and data communications, and has established 55 branch offices and technology & service centers across the globe. Currently, its products have been deployed in 77 countries, including Germany , France , U.K, Portugal and Canada , by 274 operators including AIS, British Telecom, MTN, SINGTEL, Telefonica and TELEMAR
Huawei is only getting bigger each year and Western vendors understand the company has the head to match its hat size:
FutureWei ( http://www.futurewei.com ), based in Plano, Texas, is the North American subsidiary of Huawei Technologies Co. Ltd. ( http://www.huawei.com ), a leading global vendor of telecommunications systems and network solutions with products deployed in over 90 countries.
With a strong focus on network infrastructure, FutureWei Technologies, Inc. designs, markets and supports a wide range of advanced telecommunication products for service providers and enterprise network solutions.
”
Wow huh… Cisco and LU are eatting Nortel's pie… just to give you an idea where NT is headed as resilient as it has been to flush so far… =)