Nortel: It's All Up for Sale

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abashford 12/5/2012 | 4:02:08 PM

re: Nortel: It's All Up for Sale

Bollocks, your post reminded me of:

From Jim Collin's ("Good to Great") recently published book "How the Mighty Fall: And Why Some Companies Never Give In":

The 5 Key Phases of Failure:

 

<ol>
<li>Hubris Born of Success - Success breeds arrogance and loss of touch with causes for success</li>
<li>Undisciplined Pursuit of More - Companies stray from disciplined creativity that led them to success</li>
<li>Denial of Risk and Peril - Ignoring internal warning signs (bad data gets squashed, good data gets exaggerated, indeterminate data gets a positive spin)</li>
<li>Grasping for Salvation - The use of big bold quick fixes (e.g. bold but untested strategies, hiring a celebrity CEO, attempt for major change in culture...)</li>
<li>Capitulation to Irrelevance or Death</li>
</ol>

 

This (great) book asserts that after analysing MANY failed companies with considerable scientific rigour, most companies that fail exhibit at least 4 of the above if not all 5.

They also noted it was much harder to characterize failed companies that it was to find common themes with successful companies.  They summed it up with Tolstoy's quote:

"Happy families are all alike; every unhappy family is unhappy in its own way."

Oh, and to JEPOVIC's comment below on Motorola never being great, this book actually spends a good chunk of its text using Motorola as the example case for the 5 points above.  They point to the fact that they owned the analog handset market, and in the 'undisciplined pursuit of more' they continue to promote the Irridium satellite handset launch against fairly obvious indications that it was going to be a niche market and not have a positive business case.

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inauniversefarfaraway 12/5/2012 | 4:02:07 PM

re: Nortel: It's All Up for Sale

Abashford,

Thank you again for the continuing entertainment. God forbid people think you are a sockpuppet.

An easy excuse and the classic bait and switch. Let us use the very rhetoric invoked by Nortel: They are awarding bonuses based on industry leadership compensation, i.e. Cisco. Nortel is no Cisco based on the consistent incompetence in leadership, the vacant execution. This is yet another comical facet where Nortel insiders think they are at the top of the heap, Cisco beaters, when they are at the bottom, completely incapable of delivering a real product and creating a culture that can meet and beat the competition.

Other industries face their own challenges, Detroit has been splitting the penny for decades, thinking that import tarrifs could "level" the playing field by pricing better products out of the market. Complacency is a common sin between Nortel and Detroit. The difference is the promise and heritage that Nortel threw away, combined with the riches that were squandered. Even Detroit does a better job of burning cash.

Other competitors saw the writing on the wall and judiciously moved to consolidate: Alcalu and others have demontstrated far better judgment. Even Sir Terry wisely sold. Once again, Nortel arrogance made it the loser at every turn. Nortel just could not get over getting turned down by Cisco years ago when attempting to buy them out. After that, Nortel elitism was the norm, they (Nortel) would turn everybody down just to show how good they are, once again hubris won out.

Highlight the mistakes, where to begin? There isn't enough room on this board and gigabytes on the net to describe the mistakes. In more general terms, the basic flaw in the Nortel execution is being a dinosaur. The internal culture was based on the telco model 5% growth per year, promote incompetent people, being used to dictating products rather than leading, being certain of the future, hubris, resting on laurels, the arrogance of certain survival to name but a few.

They were absolute fools to imitate competition in the execution of their business plan, specifically acquisition versus building their own superior iron. Roth was a simpleton. At a minimum, he could have done more to keep and breed the culture that had put Nortel on top in many product lines, instead he hired everybody else on the planet except the competent people. Cisco was the great winner yet again. The competition exploited the internal trend to be hard on their staff to foster better products. Instead, this completely devalued their people. giving away their sole asset: technology. "Sell the iron" was the dogma and Nortel swalled it hook line and sinker.

You will be pleased to read that there was no such thing as my being fired or let go, or laid off from Nortel. To protect the obvious guilty, it will suffice to point out that this is based on reciprocity. They dished it out, they better take it like the mice they are. If it is a little to hot for you, maybe some behavior should have been curbed and there is surely no sign that it has changed. There are some things that, if not carried out successfully, hold real consequences. Consequences such as Nortel closing it's doors.

Maybe the good people at Nortel pissed off the wrong person. Why else won't the government step in? Maybe some favorite descendant got wronged and word got around... Whomever that person might be, if he or she exists, it would be nice to have a chat someday. Rest assured, there is a reason the various governments won't step in. They pissed off a lot of folks to get to this point. There is feces on the stick as they say.

The fall from grace for Nortel came quickly enough when they resorted to fraud to make their numbers. This exemplifies once again that the entire "upper crust" at Nortel was pure fraud. Sure, Dunn took the fall, but with the vast cabinets and social interaction between all these fine people at the top, everybody knew that the books were being cooked. Like all Ponzi schemes, they all hoped the rosy forecasts would come true and that being lazy would pay off. To avoid impossible prosecution and the sterile systems exploited by insiders, there are a lot of crooks still milking this cow for all it's worth.

What followed is but a natural consequence of having zero moral fiber.

Whether capitalist or communist, it is not a system that is better, it is the human spirit, adhering to certain ideals and working hard at it that makes a winner. Most people know when they set common sense aside, as is evident in your posts. You offer an excellent example of how innocent changes in viewpoints can excuse any behavior. More to your point, Nortel did act as if it was due it's "cheese" as you write. Earning the "cheese" just wasn't on the radar. The easy money another contributing factor in the Nortel failure.

In regard to your inability to see any evil within Nortel, that is precisely the attitude that got Nortel in this spot and why it will never get out. When people's moral compass is that far out of whack, they can do no evil. Let us now revisit the inability of Nortel to retain an "Ethics" officer. Surely you will resort to attacking the office or the person who held it, however it remains that this is not so coincidentally the single largest lapse in Nortel culture.

Maybe a good start would be to evaluate executive compensation based on not being the industry leader. Executives should not be paid based on the expectation that the salary will make them better, but by performance. Nortel has done precisely what you point out, defined the metrics based on intangibles that achieve the end.

We are right back to the Dunn years where the books were cooked to trigger bonuses. Now, we no longer cook the books, but the bonus trigger is set off by farting, or burping, but not by any metric that has anything to do with performance. In short, the horse is dead. They get an outside firm to justify a payout, a firm that is on the Nortel payroll.

Let the comedy go on, you could not make this stuff up. Give me more Abashford, it is amusing to read the ever stylish "See no evil, Hear no evil..." Well, two out of three ain't bad.

 

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inauniversefarfaraway 12/5/2012 | 4:02:05 PM

re: Nortel: It's All Up for Sale

Abash,

Another little factoid on your communist diatribe, it is Nortel that is asking for a government bailout. So, you are also advocating communism as a solution for their failure at capitalism?

Yes, you are missing something, you are avoiding any mirrors. The "self righteous" is yourself buddy. Your arguments are twisted to justify an untenable position. You can twist this any which way you wish, it is painfully obvious that reality is not in your command. Nortel is a failure and it owns it entirely.

You can argue that Jesus decided on the salary and bonus, the fact is that they are boneheads and not at all at the payscale they received from the old boys club. By your own admissions, there are no decisions you can point to that can be qualified as being the right call. Even bankruptcy was the wrong call, they could have sold MEN, by your own admission, and we already know that the recent sale of $650M could have been $850M before filing for bankruptcy.

It is equally evident that you are well over your pay grade, much like the management and executive teams within Nortel. That type of pretzel logic is yet another reason Nortel is such a pethetic underachiever.

RIP Nortel, bye, bye...

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abashford 12/5/2012 | 4:02:05 PM

re: Nortel: It's All Up for Sale

You remind me of some minority politician, spouting rhetoric during question period.  Similar to a politician, a lot of words and not a lot of facts.  I wasted a good amount of time searching your post for something resembling a valid point of what you would have done better.

Instead, lets touch on some of the points you like to harp on:

1) Executive bonuses: Executives are motivated by many things, but one of the few things in the control of the board and creditors, is remuneration.  If you were trying to maintain the value of an organization thought the Chapter 11 process by keeping key personnel in their roles, how else would you propose they give these people incentive to stay in place?  Appeal to their sense of honour and duty?  If so, who is naive?  You might like to assert that no company in their right mind would want to hire these people away, but that is just not the case.  Attrition of key people is always a paramount concern in that situation (see below). 

2) Alcatel-Lucent: Oh yes, there is an example of a fabulous market consolidation.  By this consolidation, they managed to gain #1 share in several markets, and then lose it to upstarts like Huawei anyway.  This is the same company that hires Nortel employees and executives away just as fast as they can once Nortel announced its protection filing.  I guess it was all your so called "incompetents" that Nortel hired and promoted that they were after.  You might want to look at ALU's balance sheet while you are at it too.  How far away are they from insolvency?  Every key ratio is double digit and NEGATIVE.  I am waiting to see a big merger that works... still waiting... 

3) The Canadian Government doesn't want to help them:  A $300M loan from the canadian government is almost half of the acquisition price that NSN is paying for some of the Wireless assets.  While significant, this is chump change compared to the money thrown at Chrysler and GM, but so is the number of employees (and votes) at stake.  GM is supporting 1/2 a million pensioners, many of whom retired to Florida (notably a swing state).  Those employed directly and indirectly number in the millions vs. 10's of thousands.  You'll notice a high correlation between money a government is willing to spend, and the votes that money will get (not saying thats right).

Here... I will give you a hint to something they could have done better:

Had the attempted divestiture of the MEN business happened even 6 months sooner, there could have been enough time to get the cash situation (maybe) strong enough to deal with the market downturn.  But, this urgency would have required some fore-knowledge of impending market events.  Nortel brass were certainly not alone in missing that one, but at least they had the right idea about improving the cash situation.

Again, I have no motivation to defend these people, my motives are based on being absolutely sick and tired of the form of fact-less rhetoric that you --and those like you-- spout, and seeing it on sites where I go for news.  Stick to 'AllAboutNortel' for as long as it lasts, start a blog, seek help, close a door and scream... whatever.

Someday I might understand what motivates self-righteous people like yourself who feel a need to spout off.  But I just don't see the point in bitching unless you have something to contribute by your bitching.  Am I missing something?

 

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abashford 12/5/2012 | 4:02:04 PM

re: Nortel: It's All Up for Sale

"Surely Nortel should compare itself with better companies than Lucent and Motorola."

No doubt.  The point I was making was that Nortel wasn't unique in the telecom market.  Others appear to indicate that there some something particularly sinister about what happened with Nortel.  

I agree with you that the demise is far from a recent problem.  You can trace it back to (at least) 1996 when telecom was deregulated.  The resultant 'internet' boom pushed Nortel revenues far past any real value that existed in the market (they, and most others, were selling equipment to themselves via vendor financing) and when finally people realized that nobody was actually making money off of this equipment Nortel --and others-- had to cut their staff and operations by 75%.

My observation is that Nortel fell into a common death spiral that many other companies (including Lucent and Moto) have experienced and nicely summarized in WTMF's phase #4 of failure below:  

Grasping for Salvation - The use of big bold quick fixes (e.g. bold but untested strategies, hiring a celebrity CEO, attempt for major change in culture...)

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jepovic 12/5/2012 | 4:02:04 PM

re: Nortel: It's All Up for Sale

// abashford

You are discussing the demise of Nortel as if it was a recent problem, when in fact Nortel has been losing overall market share for at least a decade. Nortel used to be the buyer of major companies.

Lucent is not much better, but managed to finish off with at least some value for the shareholders. Surely Nortel should compare itself with better companies than Lucent and Motorola.

 

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