Once the dust from Nortel’s bankruptcy filing settles, the company is going to face some tough decisions: What excess will it shed and which customer base will it cater to?
The century-old Canadian telecom equipment maker filed for Chapter 11 Wednesday, seeking protection from creditors with a $107 million bond interest payment due this week toward $3.8 billion in bond debt. Though Nortel has cash in the bank (it’s got $2.4 billion to fund day-to-day operations, according to the The Wall Street Journal), the company posted $3.4 billion in quarterly losses in November and has been trading at under $1 on the New York Stock Exchange for months.
The good news is that Nortel’s most prominent customers aren’t jumping ship.
Verizon Communications, Sprint Nextel and BCE — all carriers — will remain customers, Bloomberg reported today. Nortel CEO Mike Zafirovsky called these customers immediately after the news broke to reassure them that company operations will continue as usual.
At the same time, Nortel’s largest partners won’t bail unless the company dissolves. But back in December, partners told SearchITChannel that Nortel must shed its carrier business and hone in on its enterprise networking products and services to remain viable — and to keep them on board.
Herein lies the problem: the needs of partners serving enterprise shops are vastly different than the needs of large carriers that have long depended on Nortel for solid voice equipment. And often these two are at odds since partners sometimes battle large carriers for enterprise accounts. Both sides have the same argument against each other: There are alternatives — Cisco.