Daily Archives: November 9, 2009

Nortel to Cut 56 Jobs in Texas with Approval of Avaya Deal Pending

In a move evidently connected to Avaya’s pending acquisition of its enterprise business, Nortel announced today that it would slash 56 jobs at its facility in Richardson, Texas, effective on or around Jan. 3, 2010.

The news arrived in a mandatory notification letter submitted to the Texas Workforce Commission, according to American City Business Journals.

Although Avaya’s acquisition of Nortel’s enterprise business is being reviewed by the Canadian government, recent scuttlebutt suggests the deal is likely to be approved.

In other Nortel news, the insolvent telecommunication-equipment vendor plans to delay filing its third-quarter results until as late as Nov. 16 because of changes to the way it reports data for some overseas subsidiaries.

Radware’s Alteon Refresh Recalls Halcyon Days of Computer Networking

Radware is attempting to squeeze revenue growth and profitability from its acquisition earlier this year of Nortel’s Alteon application-traffic management business.

Interestingly, Radware bought the Alteon web-switching business from Nortel for approximately $18 million, with negotiations beginning before Nortel entered bankruptcy and concluding after the insolvent former telecommunications giant had begun its court-ordered liquidation sales.

If one looks back through the virtual pages of computer-networking history, one will find that Nortel bought Alteon for $7.8 billion in stock during the last frenzied days of the Internet bubble in the summer of 2000. Even the sky did not seem the limit in those heady days, when information-technology stocks only went up, VCs were proliferating like rabbits on fertility drugs, and IPOs were as abundant as today’s bank failures.

Prescient popster Prince had sung about “partying like its 1999,” but the Internet-driven bacchanal extended well into 2000, reaching nearly to the end of that year before the first ominous signs of what Cisco CEO John Chambers called the “100-year flood” loomed menacingly. I remember vividly the end of that era, the feeling of foreboding I had when information-technology spending from telecommunications carriers and financial-services titans suddenly shuddered and sputtered.

Market cycles had not been vanquished, after all; stock prices could do down as well as up; and recent past performance was no guarantee of limitless future gains. in the end, there actually was something called hubris.

Except for some half-hearted rallies – if we’re being honest with ourselves – the information-technology industry has never returned to the frothy, rich heights of 2000. Many of us were not aware of it then, but that was the pinnacle of achievement and wealth creation for the information–technology industry, which is now as lumbering and mature as the automotive industry was in the 1970s.

From today’s vantage, in full benefit of hindsight, it’s easy to ask incredulously about what Nortel was thinking. How could it have offered to exchange $7.8 billion – even using shares as currency – for a company with revenue of $110 million? It must have been stricken by madness.

But if it was madness, the affliction was infectious. Cisco was gripped by it, too. In the spring of 2000, Cisco acquired ArrowPoint Communications, a web-switching competitor to Alteon, for $5.7 billion in stock. In some respects, Nortel’s purchase of Alteon was a reaction to Cisco’s acquisition of ArrowPoint.

Many think Cisco’s acquisition of ArrowPoint was a spectacular bust, an unalloyed failure. Even with ArrowPoint and other companies it acquired in the web-switching space, Cisco never was able to overtake F5 Networks in application-traffic management.

For a variety of reasons, though, Cisco is still very much with us today, whereas Nortel — as a result of egregious mismanagement, bookkeeping chicanery, ill-advised and poorly executed acquisitions (including that of Alteon), and circumstances beyond its control, such as the sudden collapse of carriers’ fibre-optic buildouts — is on its last weary legs.

Almost immediately after the deal was announced, Nortel’s Alteon acquisition became a debacle. Even in ideal market conditions, it might have ranked as a failure, but the episode took a turn for the tragicomic in the midst of a severe telecommunications downturn.

Over the years, Nortel wrote off mountains of goodwill associated with the Alteon acquisition. In what seemed a vertiginously short period of time, Alteon went from being a promising Nortel acquisition to a depreciating asset, then to a neglected corporate business unit, and finally to a mothballed and tattered set of technologies that Nortel sold for just $18 million.

Let’s give Radware some credit. It saw value in what remained of Alteon’s installed base and in getting a refreshed product cycle to customers who hadn’t been offered upgrades in half a decade.

In an interview with TheStreet.com, discussing his company’s release of a refreshed Alteon platform, Radware CEO Roy Zisapel said the following:

“In the last five or six years Nortel did not release any new [Alteon] hardware, any new platforms. . . . .For customers whose previous Alteon switches have started to reach capacity, now they don’t have a problem. They can consolidate multiple applications and networks on one switch — it really gives the customers the ability to migrate to next-gen data centers.”

Radware, too, can benefit from Alteon. Unlike Nortel, it might even see a return on its investment.

Cisco Decides to Extend Offer For Tandberg

Now sooner than I had posted that we were awaiting Cisco’s decision on its expiring bid for Tandberg than news arrived that Cisco has chosen to extend the existing offer until November 18.

Cisco has not modified the proposal, but that doesn’t mean it won’t do so before this story runs its course.

Awaiting Cisco’s Tandberg Decision

By now I thought we would know how Cisco intends to proceed with its stalled offer to acquire Tandberg.

So far, though, Cisco has made no statement on the matter, even though today is the deadline for Cisco to allow the offer to expire or to extend or modify it.