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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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sigint 12/4/2012 | 10:15:37 PM
re: Nortel Unifies Optical zipple:
Why did you choose Alcatel as the survivor? (Cisco seems obvious to me, but Alcatel less so.)
__________________________________________________

Thinking about it - bulk of Cisco's revenue is from the enterprise market. The mantra of that market to reduce equipment to commodities. Cisco may ultimately become the victim of that commodification.

If the PC market is an indication, bulk of the stuff sold would be assembled from boards and parts picked from the flea market. Code could be downloaded from the Vendors of components.

Cisco would continue to be a leading supplier, but would they continue to dominate the market the way they do now ?

ALA has probably a wider geographical spread of market as compared to NT or LU. Their presence in Asia is impressive, as it their ability to cultivate politicians that matter in protected markets. Don't forget, today they are the largest telecom company on the planet.
dljvjbsl 12/4/2012 | 10:15:41 PM
re: Nortel Unifies Optical This is probably an unhelpful post but ther is one Nortel employee who is absolutely contributing nothing to the company. He recently received a major pay increase. His position could be elimiated without causing any disruption to the company. I wonde if Nortel could lay off John Roth and use his salary to fund a team of 8 to 10 people.
dodo 12/4/2012 | 10:15:42 PM
re: Nortel Unifies Optical Hitekeng

Those "well connected" are seeking refuge under Wireless.

Oh yes, some VPs have already jumped ship since last march because they knew the lay offs would be announced for Q'2. One even had the gall to draw up a list of who should be axed in June while she managed to find a safe place in Wireless. This is a person who does not know how to define a network element.

We just have to wait and see
zipple 12/4/2012 | 10:15:43 PM
re: Nortel Unifies Optical dljvjbsl says:
" If that consolidation does not happen soon then the whole industry may crash."

As opposed to the good times we're enjoying now, I suppose.

Why did you choose Alcatel as the survivor? (Cisco seems obvious to me, but Alcatel less so.)
ben35bates 12/4/2012 | 10:15:43 PM
re: Nortel Unifies Optical The cutting has apparently started inside NT optical marketing operations in Ottawa and Montreal, according to a posting yesterday.
Any details? It must be part of the 2,000 to 3,500 cuts to longhaul and optical components announced a week or so ago.


Also the following appeared in Toronto paper today:

Nortel may wield axe to staff again
Business from prime customer Sprint seen to slow down: 10% could go: source

Robert Thompson
National Post
Saturday, June 15, 2002

Nortel Networks Corp.'s may be facing even more job cuts because of a slowdown of business from one of its main wireless customers, sources inside the Canadian networking giant said yesterday.

Talk of more layoffs came after Frank Dunn, Nortel's chief executive, held a "town hall" meeting yesterday that was broadcast for all company employees. Mr. Dunn addressed several issues, including a recent equity offering which raised US$1.67-billion, and the 3,500 job cuts to the company's optical components division.

Mr. Dunn said employee surveys indicate that a majority of employees list job security as their main concern. He also said company managers have been asked to identify a possible redirection of resources if areas of the business continue to falter.

He said the company was not planning any large layoffs, but a source close to Nortel said it was preparing a job cut of up to 10% of its 42,000 workers. The source at Nortel said the layoff was likely to occur by the end of June, which is also the close of the company's second quarter.

Another Nortel employee felt Mr. Dunn's speech did not signal layoffs were coming, but said Mr. Dunn told employees that the company's management would be holding a series of meetings over the coming weeks meant to identify which parts of the company were operating effectively, and which were underperforming.

A senior Nortel employee in the company's wireless division, who asked not to be named, said: "We basically took that to mean there will be a lot more layoffs."

Nortel confirmed the internal meeting took place, but would not comment on what was discussed or potential job cuts.

The town hall meeting came on the same day that Sprint Corp.'s PCS division, one of Nortel's largest current customers in its wireless group, said it will add 10% to 15% fewer users than the three-million it initially forecast for 2002 because of price competition and new credit policies. Sprint added it will sign up 300,000 wireless customers for its current quarter, less than half the amount added last quarter and well short of analysts' estimates.

According to the source inside Nortel's wireless group, the Sprint account has slowed, leaving many with little work and a feeling that their jobs are in jeopardy. Nortel is helping to build Sprint's wireless data network, a project that has been ongoing for more than 18 months.

Michael Urlocker, an analyst with UBS Warburg, said Nortel's wireless division had been one of the few points of strength for the company in recent months. There is a concern that projects like the Sprint network improvements will slow over the next six months, Mr. Urlocker said.

Without an improvement in business spending, Nortel will likely be forced to cut more jobs, Mr. Urlocker said.

"In my discussions with people in the industry and investors, I've found there is still a fairly widely held belief that there is more room for cuts," he said. "Nortel is going to need to examine which business units it decides to keep."

Mr. Dunn also told employees during the meeting that the company is still on target to record revenue of US$3.2-billion in the fourth quarter of 2002.

dljvjbsl 12/4/2012 | 10:15:43 PM
re: Nortel Unifies Optical
" If that consolidation does not happen soon then the whole industry may crash."


As opposed to the good times we're enjoying now, I suppose.


My supposition is that the entire industry is facing the prospect of bankruptcy. The whole industry could just run out of money and be unable to proceed. This industry has to be sized to the very reduced market or it is not viable. At least that is my opinion.

My other opinion is that Nortel is not going to be one of the survivors if there are any.
dljvjbsl 12/4/2012 | 10:15:44 PM
re: Nortel Unifies Optical
I do not see a possibility of an over-build, the telecom infrastructure is grossly inadequate at the moment. The Indian government has liberalised the sector, but hasn't gone overboard handing out sops. This has probably prevented the industry from growing the way it did in China. But, it has also prevented an overbuild.


This is a real question about eh capability of China and India in developing enough business to make a significant difference to the fate of the bloated optical industry. If the US and Europe cannot and do not require enough bandwidth to support this industry then what chance is there that India and China will.

Note that the problem of the optical industry is not a minor mismatching of demand to supply as Roth and company tried to portray last year, it is a major capaity and vendor glut that is going to require a massive consolidation in the industry. If that consolidation does not happen soon then the whole industry may crash. My vote is that Cisco and Alcatel will survive. The others will vanish all together (Nortel) or leave the optical business.
sigint 12/4/2012 | 10:15:46 PM
re: Nortel Unifies Optical How much money is India willing to commit to build this network. India may want a nerwork but do they have sufficient funds to support the very large optical indistry that developed during the bubble. This may turn into a very good thing for India. They could leverage their limited funds by playing off the desperation of optical networking companies to find any sort of revenue to pay their operational expenses.
However it wouldn't help Nortel or the optical industry in general verymuch. If it took about 2 years to overbuild the US market, how long would it take to do the same thing in India? Especially since there is likely to be very little profit in this due to the very dire straights of the optical vendors
__________________________________________________

At the moment, telecom is a necessity in India and not a luxury. The sector has been de-regulated considerably, and this particular network has aggressive plans.

They have considerable revenue already from mobile services, and as I understand, most of their mobile equipment is from Nortel.

It was to be expected that land based fibre would be lit with Nortel equipment, given the fact that the two companies have done business for a while.

I do not see a possibility of an over-build, the telecom infrastructure is grossly inadequate at the moment. The Indian government has liberalised the sector, but hasn't gone overboard handing out sops. This has probably prevented the industry from growing the way it did in China. But, it has also prevented an overbuild.

And BTW, this particular network is not short of cash. They already have spent the money putting the fibre place. The industry has exhibited some inmmaturity - the various networks have been sqabbling about revenue sharing, but a government broked peace pact is on its way. The equipment installation should follow.
Litewave 12/4/2012 | 10:15:47 PM
re: Nortel Unifies Optical On the other hand, that might be a too expensive way of doing something that is happening without needing any "help" from the outside.

Too true!

Cisco doesn't need to help rid itself of this particular competitors, they're doing it all themselves.

The incessant product /people shuffling and reorganization is completely alienating customers. Every damn box these days is an OPTera something. How stupid does Nortel think customers are?

If you ask me, the problem is FD hasn't had the guts to do what Steve Jobs did with Apple when he came in - clean shop, not just people, but product lines as well.
let-there-be-light 12/4/2012 | 10:15:51 PM
re: Nortel Unifies Optical I wonder whether this is the time for Cisco to strike:

Buy up what's available of Nortel and then simply shut down a potential competitor for good...

On the other hand, that might be a too expensive way of doing something that is happening without needing any "help" from the outside.
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