Like a rudderless ship, Nortel continues to drift from one strategic initiative to another with the hope of landing on firm ground. The company, which has struggled for several years, now is in the process of dumping some of its carrier equipment and refocusing its efforts perhaps on delivering corporate network equipment. So, the question arises, ï¿¼Is its new focus too little, too late?ï¿¼Nortel revised expectations for its third quarter revenue, which will close at the end of September. Rather than the $2.7 billion initially anticipated, the new number is expected to be about $2.3 billion. By itself, that news is not too surprising. After all, a number of vendors have been lowering expectations as the US economy has shown signs of a slowdown and competition has intensified.
In that news, the vendors slipped in a note about possibility selling its Metro Ethernet Networks division, which supplies optical and Ethernet equipment to carriers and cable operators. The company claimed that its carrier customers and large enterprises have been cutting back on their capital purchases more than expected and in some cases, deferring investments in optical equipment. That statement may be true, but the reality is Nortel has not been able to develop a business plan for that unit that makes sense. While companies, such as Cisco and Juniper Networks, have devised viable business models, Nortel has not.
So where does the company focus next? Nortel has spent a great deal of time and significant efforts in the 4G wireless space. The vendor has been one of the companies touting WiMAX, but that sector has been slow to take hold. Nortel has also had a significant presence in the business networking space. At one time, it vied with Cisco for the marketï¿¼s top spot, and recently that business unit has outperformed other Nortel lines of business. Retooling its products and going after the small and medium business market would seem to make sense because that segment has been demonstrating the most significant growth recently. However, it might be unwise for those companies to bet heavily on Nortel. The vendor is obviously in a state of flux, so it is unclear what course it will take and where it will eventually land.
How much interest do you have in Nortel equipment? What would the vendor have to do to entice you to use its products? What do you think will happen to the company long term?