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Nortel Unifies Optical

Nortel Networks Corp. (NYSE/Toronto: NT) has moved its metro and long-haul optical products under one Optical Networks division headed by Brian McFadden, who formerly headed the company's optical long-haul division.

"It made sense operationally. And Brian has a lot of metro experience," says a company spokesperson. Nortel's also intent on integrating its optical technologies in future metro and long-haul offerings. So moving it under one roof seemed the best way to proceed.

When reports of the division change hit the Canadian papers this morning, it was unclear whether by taking over metro optical as well as long haul, McFadden wouldn't be displacing colleague Frank Plastina, who heads up Metropolitan and Enterprise Networks. That's absolutely not the case, Nortel says. Plastina will continue to be in charge of Nortel's intelligent Internet, VOIP, enterprise, and optical Ethernet product lines.

Nortel continues to have three divisions: Wireless, headed by Pascal Debon, as before; the new Optical Networks, headed by McFadden; and Metropolitan and Enterprise Networks, headed as before by Plastina (who was once, back in the Roth era, widely considered a CEO-designate).

Debon, McFadden, and Plastina continue to report to CEO Frank Dunn.

"There's been no management change," says Greg Mumford, CTO of Nortel. "All we've done is add a bit to Brian's responsibilities."

An internal memo from Dunn, apparently issued to employees last week, outlines McFadden's new responsibilities: "Brian will have P&L responsibility for the combined Metro Optical and Long Haul business. His accountabilities include investment decisions, priorities and product marketing for non-Optical Ethernet applications, as well as R&D deliverables for all optical products, including optical product requirements for Optical Ethernet solutions."

In an interesting twist, McFadden is taking on all of Nortel's DWDM and next-gen Sonet products, including the OPTera Metro 5200 and 3500 series, spokespeople say. But several so-called optical Ethernet products, including the OPTera Metro 1000 series and the Passport 8600, are staying with Plastina's division. To make matters hairier, Plastina will continue to focus on optical sales to enterprise customers.

The split's a confusing one, especially since Nortel acknowledges that the OPTera Metro 5200 and 3500 series can be used in optical Ethernet applications. Indeed, it raises questions about how permanent this latest deck shuffling will be.

"It wouldn't surprise me from a reporting basis if Nortel was to reduce its structure to only two divisions -- wireless and wireline," says a Canadian financial manager, who asked not to be named. It would be easy to just give Plastina a separate title, he says, if McFadden were eventually put in charge of all optical products. After all, the position of COO hasn't been filled since Clarence Chandran left last year (see Nortel's Empty Room at the Top).

Meanwhile, though, Nortel seems intent on its present strategy. Marco Pagani, who was head of the Metro Optical business under Plastina's direction, will stay in the Metro/Enterprise division, but will be in charge of a new Optical Ethernet business.

Analysts seem unfazed by the news. "Long-haul optics isn't expected to recover until late 2003 at the earliest, so I view it positively that [Nortel is] getting each division in a position to be profitable," says the Canadian analyst.

In other news, Nortel's managed to exceed expectations in the sale of its equity and common share offering made late last week. The overallotment, or greenshoe offering, has been taken up and oversubscribed, Nortel says, bringing in about US$1.475 billion instead of the originally anticipated $1.3 billion (see Nortel to Raise $1.3B and Nortel Increases Offering Estimate).

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
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dljvjbsl 12/4/2012 | 10:16:47 PM
re: Nortel Unifies Optical
"Long-haul optics isn't expected to recover until late 2003 at the earliest, so I view it positively that [Nortel is] getting each division in a position to be profitable," says the Canadian analyst.


This statement seems very odd to me. Long haul optical will be losing money but by arranging the divisions in the right way, its losses won't stand out. The fact remains that long haul optical is a dead business and should be shed by Nrtel as soon as possible.
Nuetrino 12/4/2012 | 10:16:46 PM
re: Nortel Unifies Optical "The fact remains that long haul optical is a dead business and should be shed by Nrtel as soon as possible"

But it will come back, and will be a good market to be in - as long as Nortel can hold out till 2004.

I do agree that they should dramatically skinny down the operation - go dormant, except for some fundamental research areas specific to LH.

The move to place metro under McFadden is to hide the bad news (and the mess) from his existing organization. Thus the problem, all Nortel is doing is re-arranging the dirt, their not really cleaning house the way it should be done.

In contrast, the Enterprise business (which has strong signs of life and profit) has a close strategic relationship to Metro, a helluva lot closer than LH - you'd think if Nortel really got it, they would be doing everything they could to create a seamless offer based on their Enterprise products and the Metro products and leverage thier demand knowledge both ways, i.e. knowledge of Enterprise needs to Metro SPs and knowledge of Metro SP capability to Enterprise.
zweisel 12/4/2012 | 10:16:46 PM
re: Nortel Unifies Optical dlsjbsl wrote - "The fact remains that long haul optical is a dead business and should be shed by Nrtel as soon as possible."

Sure - then everyone should dump optical: Lucent, Tellium, Ciena, Fujitsu, Optishpere, Innovance... you don't drop a business because it is temporarily in the dumpers. The wireless business units can fund LH until it returns like LH did to wireless for years.
Belzebutt 12/4/2012 | 10:16:45 PM
re: Nortel Unifies Optical This statement seems very odd to me. Long haul optical will be losing money but by arranging the divisions in the right way, its losses won't stand out. The fact remains that long haul optical is a dead business and should be shed by Nrtel as soon as possible.

NT is not "shedding" the business, but many of the recents cuts are in long haul, to make it profitable. Nortel is doing exactly what they should be - keeping their competency in that area but making sure they don't waste too much money developing products there is just no demand for in the next while.
nt_survivor 12/4/2012 | 10:16:44 PM
re: Nortel Unifies Optical The main rationale for consolidation, IMO, is to reduce redundant development effort for metro vs. LH -- not "rearranging the dirt". Nortel's numerous mistakes nonwithstanding, don't always look for the most cynical reason for the change. It makes sense from a development perspective.

techdocs 12/4/2012 | 10:16:42 PM
re: Nortel Unifies Optical With Nortel Share Dilution of slightly over 40% at the recent price of $1.42, there is NO HOPE that Nortel will be here a year from now. This is the most Diluted Stock in the History of the Stock Market(s) - Period. LOOK at the UN-balance sheet, factor in the Liabilities and assets and its very clear to see that Chapter 7 is on the way. Nortel is HISTORY.
Belzebutt 12/4/2012 | 10:16:41 PM
re: Nortel Unifies Optical Roth told us all that It would come back by 2001. Then it was 2002 and now it is at least late 2003 or 2004. Nortel keeps pursuing a mirage that continually recedes into the distance. A respected analyst in Canada, who was one of the few to correctly identify the bubble, says that there is 10 to 20 years of capacity already installed. When will Nortel finally rid the shareholders of this money pit?


You will be happy to hear then, that Dunn said he wants to make NT profitable in the CURRENT market, without waiting for and end to the downturn. Surely this would make you and the shareholders happy, isn't that what you just asked for?
dodo 12/4/2012 | 10:16:41 PM
re: Nortel Unifies Optical "It makes sense from a development perspective."

then why did they split it in the first place back in January 2001 when the LH market has already shown that it is going down?

Some of the Sales force was already axed in November 2000 because of poor visibility as far as LH sales and some of the emerging carriers were already showing signs of near death.

It is once again the musical chair of re-orgs and nothing gets done because of restructuring. They need to cut 3,500 and some of the boys from LH will survive at the expense of the serfs in Metro and Optical Ethernet.

After this re-org, let's watch and see what happens in sales when Gary Donahee leaves. His successor SS will re-organize to pull back all his cronies.

This will be the merry-go-round of re-org until Q'3 when the ILECs and RBOCs start budgeting capex for 2003.

This is how the days go by
dljvjbsl 12/4/2012 | 10:16:41 PM
re: Nortel Unifies Optical
But it will come back, and will be a good market to be in - as long as Nortel can hold out till 2004.


Roth told us all that It would come back by 2001. Then it was 2002 and now it is at least late 2003 or 2004. Nortel keeps pursuing a mirage that continually recedes into the distance. A respected analyst in Canada, who was one of the few to correctly identify the bubble, says that there is 10 to 20 years of capacity already installed. When will Nortel finally rid the shareholders of this money pit?

However suppose that it does come back as Nortel predicts in late 2003. What sort of business will it be? Will it be marked by the frenetic growth of the bubble? More likely it will be a low growth business requiring extensive R&D to compete and with numerous competitors to drive down prices. This is not a recipe for a profitable high margin business.




edgecore 12/4/2012 | 10:16:40 PM
re: Nortel Unifies Optical
When this comeback (of sorts) does happen...how much infrastructure could Nortel actualy move?

Isn't Qwest's Network only using 40 lambda's out of a possible 160? With math like this, multipled over all other carriers and SP's who are using less of their existing capacity...where will the steady growth come from...Metro :-)

Plus, who wants to buy that overgrown HDX, its huge...and if people do buy it, what is realistic volume on that Puppy?

EC
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