Nortel: Bankruptcy Move Protects Cash for Support

Nortel: Bankruptcy Move Protects Cash for Support

When Nortel Networks Corp. filed for protection from creditors in the U.S. and other countries last week, one of the telecommunications equipment vendor's primary goals was to preserve a cash holding of $2.4 billion, which it plans to use to provide ongoing support to customers.

The $2.4 billion "is an important number to understand," said Joel Hackney, president of Nortel 's enterprise solutions unit. "That money allows us to deliver products we have committed to customers and [continue] product support."

Hackney said that as soon as the bankruptcy filings were announced, he called the CIOs at Nortel's five largest customers to explain the move. "They're savvy, and they get it," he said.

IT managers who might consider switching to rival vendors should look at why they chose Nortel in the first place, Hackney added. "I'm absolutely convinced that our value proposition only gets stronger with the financial protections," he said.

Nortel has debts of about $4 billion and was due to make a $107 million bond payment last week. CEO Mike Zafirovski said in a statement that the bankruptcy filings would enable the company to restructure and narrow its focus.

The International Nortel Networks Users Association, a Chicago-based group with about 4,000 members, issued a statement saying that the filings will give the vendor "an opportunity to truly focus on strengthening" its financial position.

"Chapter 11 is simply a restructuring tool, and Nortel is not going away," Victor Bohnert, the INNUA's executive director, said in an interview.

Nortel's filings "give me no pause at all," said Pierre-Eric Belzile, executive director of information and communication technology for the Montreal Canadiens hockey team. "I'm a big user and a big supporter."

The Canadiens recently installed IP phones from Nortel, and the team uses the vendor's gear to support a ticket-sales call center and the ticket-scanning system at the Bell Centre, its rink.

Zeus Kerravala , an analyst at Yankee Group Research Inc. , said Nortel might not have had to seek protection from its creditors if the economy hadn't soured so sharply. But he gave the company a rating of just 4, on a scale of 1 to 10, for its technology innovation. "Where," he asked, "can Nortel lead?"

This version of the story originally appeared in Computerworld's print edition.

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