The idea seems to be to provide a broader base of communications solutions for Nortel's customers, as opposed to simply building out and supporting the network. The move is helped by today's announcement of the settlement of patent infringement lawsuits between Nortel and Ciena
In return for the new focus, Nortel may sell or spin off its Universal Mobile Telecommunications Systems (UMTS) division, because of the intense competition in that market. It remains to be seen whether market leaders such as Alcatel
Nortel also landed large contracts during the quarter with international cable operator Liberty Global
The company last saw a profitable fiscal year in 2003, and even that success was based on one-time items. Management has set a gross margin goal of 40% and a full-year sales growth target in the high single digits on flattish operation expenses. That would produce operational margins around 2%-3% and a small net loss for the year. The turnaround plan, then, has a longer-term focus than the next few quarters. That's what I like to hear.
If I'm reading management's comments right, it sounds like it wants to do what Cisco
- Nortel's Sleight of Hand: Fool by Numbers
- Will all our networks soon become untethered?
- One Fool thinks Nortel already missed the bus.
- Then again, you could always ride technology to a triple.
Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he's awaiting the home entertainment revolution with bated breath. You can check out Anders' holdings if you like. Foolish disclosure has its strategy all figured out.