What Nortel's Bankruptcy Means For Your Business - InformationWeek

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1/14/2009
04:41 PM
Fredric Paul
Fredric Paul
Commentary
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What Nortel's Bankruptcy Means For Your Business

By now you've probably heard that Canadian telecom giant Nortel has officially gone bankrupt. But if your company uses Nortel equipment, you're probably still wondering what that means to you.

By now you've probably heard that Canadian telecom giant Nortel has officially gone bankrupt. But if your company uses Nortel equipment, you're probably still wondering what that means to you.Well, I hate to say it, but it's still too soon to tell for sure. Nortel and others are busy trying to reassure us that all will be well. Competitors, meanwhile, smell blood in the water and are circling like hungry sharks trying to pick off worried Nortel customers.

So, here's InformationWeek's version of the basic story: "The action had been expected ever since Nortel hired bankruptcy lawyers last month" and adds that the company expects its "day-to-day operations to continue without interruption" while "financial sources in Toronto said they expect the company to be broken up eventually."

In the meantime, InformationWeek's Mike Fratto tells Nortel customers to Breathe And Relax: "Despite the doom and gloom about the announcement, Nortel is far from a fire sale. Restructuring may be a good step to get control of the company. With $2.4 billion in cash, Nortel is in a far different position than U.S. automakers."

Fratto's advice? "The key here is not to panic if you are a Nortel customer. It is entering bankruptcy from a pretty good position with liquid assets to rely on, but the picture isn't rosy... Unlike startups that fail, [though] Nortel has a channel and support chain that will be able to maintain its gear in the future so you will likely be able to maintain support contracts on existing equipment." But he concludes: "I hate to kick a company when it is down, but if you're looking at Nortel for equipment purchases, I'd really examine the competition."

That won't be difficult, I've already received emails from ShoreTel, for example, noting that: "Fortunately there are a few strong remaining companies who will continue to drive the category forward so the Nortel customers can transition to a more stable provider."

At the same time, though, the International Nortel Networks Users Association (INNUA) sent a missive saying the organization "chooses not to speculate on Nortel's next move, but supports the immediate actions Nortel has taken."

Well, I choose to speculate, and my guess is that the bankruptcy is just another step in Nortel's long slow decline. It may not be the death knell, but it's hardly a turnaround, either.

If your company has Nortel equipment in house, you're probably fine. And you might even see some good discounts if you're ready to buy more. But if you're thinking about making a new, long-term commitment to the company, you might want to think again.

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