This morning I had the opportunity to do a brief interview with Joel Hackney, President, Enterprise Solutions at Nortel, to discuss some of the key aspects of the company's position as it goes through the reorganization process after filing Chapter 11. Nortel is clearly beginning a process of trying to be more proactive in explaining where it stands and where it expects the Chapter 11 process to take it. Here are some highlights from our interview:On the decision to file:
What we announced in creditor protection, we feel strongly that it's a proactive, decisive move that the board of directors has made which really allows Nortel to be placed on solid financial footing once and for all.
What it does is it deals decisively with our legacy costs and our debt burden. It allows us to effectively restructure our operations, and accelerate our drive to our strategic focus in an effective and timely manner. The key to all of this, in my opinion, is that the board--why I say proactive and decisive--made the decision at a time when we had adequate cash, $2.4 billion of cash on our balance sheet to do both--run the operations, move to our strategy, and restructure the capital structure of the business.
Customers had, pre-filing, questions around the capital structure of our corporation, for many quarters and many years in many cases, and you know that very well. We've been able to address those questions decisively now by removing this long-standing burden from the corporation.
What it does is it deals decisively with our legacy costs and our debt burden. It allows us to effectively restructure our operations, and accelerate our drive to our strategic focus in an effective and timely manner. The key to all of this, in my opinion, is that the board--why I say proactive and decisive--made the decision at a time when we had adequate cash, $2.4 billion of cash on our balance sheet to do both--run the operations, move to our strategy, and restructure the capital structure of the business.
Customers had, pre-filing, questions around the capital structure of our corporation, for many quarters and many years in many cases, and you know that very well. We've been able to address those questions decisively now by removing this long-standing burden from the corporation.
I asked him what milestones customers should look for as Nortel proceeds through the reorganization process; he responded by pointing to new customer wins he said Nortel has achieved even post-filing:
The major milestone that people should look for is for Nortel to continue to be in the marketplace, being proactive about the value propositions that we're putting forward and the wins that we are having. And to that point, I'm very pleased to let you know, even since filing, we're winning new customers and contracts on a global basis. It's in the hundreds. And these are not just replacements or run of the mill projects. Without giving specific customer names I'm not privy to give, these include things like the largest hospitality investment in the world.
The main milestone your readers are going to be looking for is, what is Nortel going to be doing in the marketplace, and we're using this opportunity to really accelerate.
The main milestone your readers are going to be looking for is, what is Nortel going to be doing in the marketplace, and we're using this opportunity to really accelerate.
I asked what Nortel has told customers that has persuaded them to continue or even make new investments with the company:
What they look at is a couple of things: First is, What is the objective of Nortel's filing, what are we trying to accomplish, and so we take some time and try to explain that to them, that we will emerge stronger, on more solid financial footing, number one.
Number two is, they spend time understanding why we can make that statement. And they start to look at our cash balance as a corporation. They look at the liabilities that were pre-existing and that now have been either eliminated or reduced significantly. And then they look at things like the ability to continue to support and supply the products they've come to rely on. And so they look at things like the agreements we've put in place with our supply partners to ensure sustainability of supply. The most publicized is our pre-arrangment with Flextronics, but we've done that across the board. I think one proof point in terms of a milestone, coming back to your main question: Customers have told us this is a critical area that we need to watch, make sure we support them the way they've become used to.
We measure our on-time delivery performance daily and weekly to our published lead times. Last week we had one of our best performing weeks ever, at 96% delivery to our published lead times. And so it's proof points like that and facts like that that they do their due diligence on and that gives them a level of confidence to move forward.
Number two is, they spend time understanding why we can make that statement. And they start to look at our cash balance as a corporation. They look at the liabilities that were pre-existing and that now have been either eliminated or reduced significantly. And then they look at things like the ability to continue to support and supply the products they've come to rely on. And so they look at things like the agreements we've put in place with our supply partners to ensure sustainability of supply. The most publicized is our pre-arrangment with Flextronics, but we've done that across the board. I think one proof point in terms of a milestone, coming back to your main question: Customers have told us this is a critical area that we need to watch, make sure we support them the way they've become used to.
We measure our on-time delivery performance daily and weekly to our published lead times. Last week we had one of our best performing weeks ever, at 96% delivery to our published lead times. And so it's proof points like that and facts like that that they do their due diligence on and that gives them a level of confidence to move forward.
As for how long the reorganization process might go on and how the Enterprise division might emerge, he was not very specific--which isn't surprising considering how recent the filing still is:
The timing depends on several factors. Short answer is, I cannot give you a precise date. But what I can say is that, if you look at history and other companies that have filed, the speed at which you move through the process is directly correlated to the strength at which you enter the process. And so that's why I think this is a pretty important point, that we made the decision when we did, with the cash balance that we have, because that does give us the strongest ability to move through this process quickly.
What we've been very clear on is, this allows us to make sure we reassess our strategies and accelerate our actions to move towards those. You may have seen a few examples of the steps to really narrow our focus and cut costs and move to our strategy, one being our plans to discontinue our mobile WiMAX business and our joint agreement with Alvarion. This is a clear move to make sure that we are able to focus and better manage our investments, but also work closely with Alvarion to transition our mobile WiMAX customers to them. So that's one example of: you'll see Nortel accelerating actions that drive towards our strategy.
And we've been very vocal on our leadership position and importance for enterprise, and our Unified Communications position. And so we are continuing to deliver on customer commitments, on R&D investments. We had very strong growth in the areas where we invested in 2008, and so that is our plan and that is the progress that you'll see us continue to move towards.
What we've been very clear on is, this allows us to make sure we reassess our strategies and accelerate our actions to move towards those. You may have seen a few examples of the steps to really narrow our focus and cut costs and move to our strategy, one being our plans to discontinue our mobile WiMAX business and our joint agreement with Alvarion. This is a clear move to make sure that we are able to focus and better manage our investments, but also work closely with Alvarion to transition our mobile WiMAX customers to them. So that's one example of: you'll see Nortel accelerating actions that drive towards our strategy.
And we've been very vocal on our leadership position and importance for enterprise, and our Unified Communications position. And so we are continuing to deliver on customer commitments, on R&D investments. We had very strong growth in the areas where we invested in 2008, and so that is our plan and that is the progress that you'll see us continue to move towards.
I asked about the Nortel-Microsoft partnership, the Innovative Communications Alliance (ICA):
The relationship and the progress on the ICA alliance remains very strong. We have quarterly reviews with the senior executives,myself and the Microsoft side on a routine basis. We've aligned our go-to-market strategies even stronger together over these past couple of months, and going into 2009. And Microsoft has been very vocal and public on their continued commitment to the alliance itself. We are now in the thousands of UC deployments together, we are far and away the strongest leader in UC deployments in the industry. We continue our R&D investments on both sides. We continue to have Nortel employees on campus there with Microsoft, the only non-chipmaker to have badged employees on site there. And so on all levels, the alliance, now in its third year, remains very very strong. We have strength in our organization within enterprise to drive software and services even stronger.
Nortel's former lead on the ICA, Ruchi Prasad, recently left the company, so I asked about the status of Nortel's ICA leadership team:
We did name Ravi Chauhan as our global leader for advanced software and services, who will have the business unit responsibility for the alliance, and also Susan King will also have the direct alliance relationship responsibility. Susan has been with the alliance from the beginning, and is well known with Microsoft, and we both made that decision together. So everything you're seeing and the progress we're making indicates the strength of the alliance going forward.
Finally, in light of the recent announcement by Shared Technologies, a Nortel channel partner, that they were adding Avaya to their roster, I asked Joel Hackney how Nortel was approaching its channel strategy:
Channel partners remain a critical part of our strategy. Nortel's strength as a company, now 100 years old, has been very synergistic and complementary and built on the strong partnerships with our channel partners. That has always been the same, that will continue to be the same. We're not like some companies who go in and out on their view of channel partners, one year thinking they're important, the other year think they're not. We are one that has consistently driven that message, and we will continue to. And I think that's a large part of what you're seeing, why so many of our channel partners are stepping forward and supporting Nortel through this announcement and through this transition. And so it's part and core to our business model. We're always looking to increase the capabilities of our channel partners around the new areas we're growing, such as UC. So both existing partners and new potential partners who are interested in investing in this area and helping us grow this part of the industry, those are the partners we'll continue to strengthen.
