Nortel: We're Winning New Biz in APAC
While Nortel's businesses in North American are under fire and up for sale, McLachlan says Asia-Pacific accounts for approximately 21 percent of Nortel's revenues and, as the company has not filed for bankruptcy protection in Asia, it is very much business as usual there. (See Nortel to Sell Wireless Assets to NSN and Nortel: It's All Up for Sale.)
That includes the addition of at least two new customers, he says, citing a contract in Australia for Nortel's Carrier VoIP Application Solutions (CVAS) completed in the last week as an example of new business. It is news that will register with other vendors believed to be interested in this part of Nortel's business including: Sonus Networks Inc. (Nasdaq: SONS), Genband Inc. , Nokia Networks , and Avaya Inc. . (See Who's Dialing In for Nortel's VoIP Assets? )
"We have the footprint and customers, despite where we are as a company," he says.
Sizing up Nortel's Asia businesses
Nortel's public customer reference list covers most of Asia's major markets including: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Philippines, and Taiwan. McLachlan cites NTT Group (NYSE: NTT), SingTel Optus Pty. Ltd. , Philippine Long Distance Telephone Co. (PLDT) , and SK Telecom (Nasdaq: SKM) as flagship accounts.
The LG-Ericsson Co. Ltd. JV plays a significant part in the company's regional business and has been "very successful" in gaining market share in Korea, says McLachlan. The business is run, is reported, and will be sold separately. (See Nortel Offers Up Its LG-Nortel Stake, Nortel Selling LG-Nortel Stake, and NSN Misses Nortel's Key APAC Assets.)
LG-Nortel recorded strong 2008 figures, but has found 2009 tougher going as its year-on-year revenues took a 66 percent dive for the first quarter of 2009, although the company still claims a management operating margin of 26 percent for that period. (See Nortel Stays the Course, Declares Victory.)
Nortel's Asia operation is predominantly a sales and distribution business. McLachlan says there is a lot of work going on with existing customers and "no lack of interest in new business." He admits though, that customers are anxious and that Nortel is coming under closer scrutiny from its customers.
What customers want
The microscope is primarily focused on the process and timeline for disposing of the company's assets and how support levels will be maintained before and during that process.
The first is all about communication, says McLachlan. "I've never been as busy in my time at Nortel and am talking to customers and staff all the time." As for the second, "Support activities are what we do," he says, and the company is being constantly assessed. "Our customers benchmark us, and our product orders are measured around physical delivery," he says.
He emphasizes the strength of customer relationships and points to the fact that key customers were quoted in support of the NSN bid for the CDMA business as an indication of how important customer concerns are in the selling off of the businesses.
"In the NSN announcement you saw customers speaking out because they like the technology and don't want it to go away."
Customers also want sight of the innovation road map to see what's coming down the pipeline and that the technology is still moving forward. "We are a company recognized for technology excellence," he says and follows the party line set by Richard Lowe, president of carrier networks, following the NSN announcement by pointing to Nortel's No. 1 positions in MEN, Carrier VoIP, and GSM-R. (See Richard Lowe, President of Carrier Networks, Nortel.)
McLachlan is keen to concentrate on the technology, saying that while he cannot comment on the future of the Nortel name, he is confident that the technologies will continue.
Getting to the specifics of the Asia business, it'll come as no surprise that McLachlan highlights the company's MEN business and particularly the 40-Gbit/s solutions, as this where Nortel is claiming a lead and speculation around potential bidders is rife. (See Nortel Claims 40G Lead, Who's Waving Their Wad at Nortel’s MEN?, and Selling Nortel's MEN.)
Of Nortel's 46 40G deployments, 12 are in Asia. These include networks in Korea and deployments with Southern Cross Cables Ltd. There are also 40G trials going on elsewhere in the region, as well as two active trials of 100 Gbit/s with terrestrial carriers, according to McLachlan, although he would not reveal more details.
McLachlan reiterates that demand for 40G products is bucking general decline in the optical market. Amongst all the usual drivers for additional bandwidth, he highlights the growing trend in Asia for government-backed national broadband networks -- such as is being seen in Australia, South Korea, Malaysia, and Singapore -- as a significant stimulus for the business. (See Singapore Makes FTTH Strides , Australia Unveils $31B FTTP Plan, and China to Top Capex Table .)
He also says that, "40G is an important step but so is building out the rest of the backbone and submarine infrastructure, and we are seeing something of a renaissance in submarine networks."
Setting up to sell
McLachlan would not be drawn on the best outcome for Nortel Asia now, other than to say that time is of the essence and it was in everyone's best interests for things to be settled quickly. He emphasizes that above all the break-up of the assets should be done in an orderly way with clear communication for customers and staff.
Suggestions that Nortel has already lost much of its best talent have been rife, but McLachlan rejects this for Asia at least, saying he is "fairly confident that we've managed to keep our key talent." He did admit though that the situation was an obvious catalyst to make people assess their situations and make personal choices. (See Nortel's LTE Brain Drain.)
As for the business structure, he says that since the company went into bankruptcy protection, the Asian business has been restructuring around the five business units and is managing and reporting the units separately in readiness for new owners.
Finally, McLachlan gives some hope to those wishing to avoid a long and depressing decline, suggesting that negotiations on the sale of the other four divisions are at "advanced stages."
— Catherine Haslam, Asia Editor, Light Reading