After the announcement last month of more workforce cuts
and seven executive-level firings, Nortel Networks' chief executive
Bill Owens said the network equipment manufacturer is still
investing heavily in research and development and looking forward
to a "pretty exciting future".
Owens also expressed concerns about a future consolidation of
several networking equipment supplier, including tough new Chinese
competitors.
Companies such as Huawei Technologies are "very competitive and
are competing in the Western world and the UK and in places I would
not have expected them to be", Owens said. "They have good
products, but we will compete with them."
Huawei has a joint venture with 3Com and Owens said Nortel is
considering different ways of protecting itself against
competitors, including setting up its own partnerships or joint
ventures. "Everybody [in the industry] is talking to everybody,"
Owens said.
At the same time, he said Chinese competitors will create
pricing pressures and predicted that profit margins for all
companies in the networking industry are "likely to go down".
His comments follow news that the company would lay off about
3,500 of its 35,000 workers and the announcement that it had fired
seven finance executives as the result of an independent review of
Nortel's financial results for 2001-04.
Owens replaced the former Nortel chief in April, who was
dismissed in connection with the same financial probe.
Owens noted the "roller coaster ride of the last few years" at
Nortel, which has seen its workforce drop from 100,000 to 35,000
and its stock price dip from $100 (£55) per share to 40 cents per
share at one point.
Nortel is still spending as much per employee on R&D as its
competitors - about $2bn a year since 2002, a spokeswoman said.
Last week, Nortel estimated its revenue at $5.1bn for the first
six months of 2004, with expenses at $2bn, including sales, general
and administrative expenses, and R&D. About half of Nortel's
workforce is devoted to engineering, Owens said.
About 22% of Nortel's revenue come from enterprise customers,
with the remainder coming from wireline, wireless and optical
products sold to service providers, according to financial
records.
Opportunities to expand revenue include finding ways to make the
internet and wireless links more secure, Owens said. He also said
Nortel will try to market itself better to its customers and has
appointed a board-level business-development executive to help with
that effort.
Clent Richardson, vice-president of global marketing at the
company, said, "Nortel is not particularly good at marketing... and
that is one of the reasons I am here."
Zeus Kerravala at analyst Detwiler, Mitchell, Fenton &
Graves, said Nortel has long been known for "good engineering, poor
marketing", which means a renewed focus on marketing could
help.
Kerravala also said Nortel's financial reporting problems have
not been a concern of customers and that Nortel is probably the
only networking equipment supplier apart from Cisco Systems to
offer products and services to both service providers and
enterprise customers.
"It helps customers that Nortel has knowledge in both areas," he
said.
As a result of the recent executive-level firings, Owens also
said that Nortel is appointing a vice-president for ethics and
compliance, but he denied that there is an entrenched culture of
wrongdoing at Nortel.
"Is there a cultural issue of doing wrong? I will say I have
never seen a company more intent on doing things right," Owens
said.
Nortel's problems have been over financial accounting, including
when to accrue profits and revenues, and an independent review is
under way to change processes and personnel and to report corrected
numbers by the end of September.
Matt Hamblen writes for
Computerworld