In the wake of yesterday's discouraging earnings report, there's once again a lot of speculation about what's going to happen to Nortel.Nortel CEO Mike Zafirovski gave a series of interviews yesterday in which he claimed that sales rose in February and March after taking a beating in January immediately following the January 14 bankruptcy filing. This echoed what Enterprise Solutions president Joel Hackney told Nortel customers at VoiceCon in March.
During this period of uncertainty post-bankruptcy, I've heard many longtime Nortel observers remark on--"marvel at" may not be too strong a term--the durability of Nortel customers' loyalty. And on some level, that makes perfect sense. For Nortel customers, unless you're going out to a procurement right now, you don't necessarily need to make a decision about your future with Nortel; you can afford to wait and see how things play out. As Steve Leaden has pointed out here on No Jitter, you need to have a plan for a worst-case Nortel scenario, but you don't need to take hasty action. And these days, let's face it, nobody's going out to procurement if they don't have to.
The other hard truth here is that a lot of enterprise networking professionals, telecom managers in particular, have invested a lot of their career capital in their ability to manage Nortel systems. That may be the source of some of the temptation toward denial; if and when Nortel gear goes away, so does a chunk of that knowledge base you've built up.
The truth is that there's a good chance that running Nortel enterprise communications gear is not a viable long-term career strategy. If a private equity or adjacent-market company buys Nortel, then Nortel products may go on and new product development may breathe new life into this technology--and career path. But if Avaya or Siemens Enterprise buy Nortel, then Nortel gear will be phased out.
The upside of the customer loyalty and, ironically, the disastrous economy, is that Nortel's customer base might have eroded even more quickly in a more active buying climate. The chilly economy may have helped to preserve Nortel's customer base like Ted Williams' head in the freezer. Since competitors or potential adjacent-market acquirers like Aspect's owners are interested only in that customer base, that's helped maintain the value of Nortel Enterprise.
UPDATE: Bo Gowan, who runs Nortel's corporate blog, has wisely begun posting Mike Z's regular updates to employees; these internal "Z-mails" were inevitably leaking to the media anyway, so it makes sense to go ahead and put them out there. Here's Mike Z's letter to employees regarding yesterday's announcement of the financials.
