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Better M&A, management and marketing skills always win the war

As Ron Gruia pointed out this morning, the Nortel fire sale continues and a once-great company with a market cap of $250 billion is effectively being sold off at bargain-basement prices. In fact NSN picked up the ailing Canadian company's CDMA and LTE business for about one times revenue or $650 million. At this rate the entire company will be sold off for a total of $2 billion. The silver lining in this dark news is that customers will be able to have a solid company behind them in NSN and thankfully at least 2,500 employees working in Canada, the U.S., Mexico and China will be able to maintain their jobs working for NSN.

As a show of support for the deal, EDC or Export Development Canada is throwing in $300 million toward an NSN credit facility - a full 10x more than the agency was willing to commit to Nortel!

For NSN the deal means a stronger North American presence and also they go from not having a CDMA business to becoming number two. They will have to work hard to maintain this business as Asian rivals are coming on strong. An additional benefit of the deal is a number of LTE patents, technology and expertise which will come in very handy as the world transitions to faster wireless broadband networks.

I have seen some surmise Nortel went down because of open source and the Internet and to some degree this is part of the problem. But perhaps the biggest problem at Nortel was failure to adjust to a market that moves faster than ever coupled with the inability to effectively integrate acquired companies. Some Nortel employees told me the company was too flexible with the companies they acquired and should have set tougher rules regarding integration.

The major take away from this ordeal is how a company with superior technology got beaten by other companies with inferior technology but better M&A, management and marketing skills. At the end of the day the products are important but as Nortel continues to show us, having great technology alone does not a long-term successful strategy make.

We are in a time of unprecedented financial turmoil and it is apparent to me that productivity needs to increase to help us stabilize the job losses and hopefully get our economy back into growth mode. It is devices like the Pre which will in fact help corporations boost productivity tremendously. Improved communications flow is the lubrication economies need to operate at peak efficiency.

Palm Pre

It's been an event-filled couple of weeks with the rollout of the Palm Pre and new iPhone 3G S and the new 3.0 iPhone OS/software version. I did get a chance to use the Pre and am impressed with how much it reminds me of the iPhone but with more functionality - multitasking and a menu system which makes it much easier to switch between apps. I would venture to say the Pre design allows you to be more productive than the iPhone. Of course the iPhone has more apps (50,000 and counting) but you can run old Palm apps on the new Pre webOS meaning there are more apps available for the new gadget than you may have thought. In addition, the Pre webOS allows traditional web apps to run on the device meaning we can see many new Palm apps that won't take a great deal of time for developers to roll out.

The keyboard is another big differentiator of the Pre and most people have no problems using it based on my informal questioning at the event last week. Personally the keyboard was too small for my fingers and I had to use the fingernails on my thumbs to type. I do remember having to do this on an old Blackberry as well and I am sure over time I would get pretty good at typing on the Pre. Also it is a bit awkward to hold at first but Sprint employees assure me over time it becomes very comfortable to handle.

My informal tests show the Pre is not quite as fast as Safari on the iPhone at rendering web pages. But the flipside is the Pre is pretty snappy when you rotate it - the screen rotates more quickly than the iPhone. I also sense the Sprint EVDO network is currently faster than AT&T 3G.

iPhone 3G S (Yes -- looks just like the iPhone 3G)

So now that the new iPhone is out which device would I choose? First I should say Nokia, RIM and others have solid devices as well but for now let's focus on iPhone versus the Pre. Apple has now fixed a number of problems with the iPhone such as cut and paste, better search, MMS, landscape keyboard and there is now a video camera as well. So the choice is difficult. I would say the iPhone is still the winner for now. I despise the keyboard on the iPhone so you can imagine how good the rest of the device is for me to say the iPhone wins.

However it is worth pointing out that part of the reason the iPhone wins is because of the slew of apps on the market which run on the device. If the Pre can gain traction and wee armies of developers rolling out software which runs on it then it is possible I could be neutral on this race.

There is also the issue of the screen size. I believe every square inch of real estate is crucial on a mobile device. The iPhone is marginally larger at 3.4 inches vs. the Pre's 3.1 inches. The resolution is identical but the added real estate does help when playing games, reading and displaying menus.

One last thought is I am thrilled with the new Apple Find My iPhone feature which will prevent others from going through he lost iPhone ordeal my wife recently dealt with.

Although no one would go on record, my informal Q&A with people familiar with the matter leads me to believe the Pre will soon have a version with a larger keyboard which comes out of the device in landscape mode which will make it competitive with devices like those from HTC - the XV6800, G1, etc.

I should this comparison end by saying the Pre is very impressive based on my quick use of the device. I expect to explore it in more detail as time goes on and give you my feedback.

At a certain point Microsoft went from being the small friendly corner store computer company to an awe-inspiring hulking behemoth that crushed virtually any company in any market it wanted. Thousands of PC utility and other vendors have been put out to pasture as Microsoft decided their markets would be good add-ons to the operating system business.

I wonder if we aren't about to see the same thing happening with Amazon. The company recently announced that any blogger can now have their content sold on the Kindle and get paid in the process. The two sticking points are Amazon sets the price and also has the ability to relicense the content on any digital device it pleases.

In addition, the company gets 70% of the revenue generated from the blog (or other content for that matter) and the publisher gets the remaining 30%.

So publishers should be happy as Amazon is touting the Kindle as the savior of publishing, right? Well, the company just may be right and although I predicted no one wanted the original Kindle, later generations of this electronic reader have developed a nice following.

I am also on record as saying people won't pay for content and I still believe this to be the case. I proved the New York Times wrong (I was off by 6 months) and it be worth watching to see if I prove Rupert Murdoch wrong. There will be exceptions such as financial news which helps in investment decisions and niche areas such as comparison sites like consumerreports.org and the medical and pharmaceutical industries, etc. But by in large, consumers expect content to be free and every day they expect it to be even more easily accessed. The Kindle's model is the opposite of the logical future of content.

So on the one hand one has to applaud Amazon for thinking they own the future of the publishing market and can charge through the nose because they are in control. But as far as I am concerned, I will be happy to read blogs on mobile devices for free. I am certainly not alone. I am sure at some point I may get a Kindle to try but just how many devices do I really want to carry around? It seems the netbook/laptop in the Kindle killer and as soon as carriers get serious about setting very competitive pricing plans on netbooks, we will likely see Kindle interest subside dramatically.

What is perhaps the most ironic about the situation is the iPhone is a great alternative to the Kindle for shorter documents such as blog entries and this from Apple/AT&T who have created a fairly restrictive platform where applications and even technologies such as VoIP and Slingbox need approval.

I bet this is the exact reason Verizon is following AT&T into the netbook market with ultra-cheap hardware.

But if Amazon wins out and the Kindle becomes the platform of the future I believe the outrageous percentages they are demanding and draconian licensing rights will push the media to slam the company so hard that the PR damage alone will offset any revenue made by this new media relationship. These are of course the same media companies that helped Amazon build its brand from scrappy upstart ten years ago to what many see as corporate media bully today.

For nearly 13 years, Greg Galitzine has been a tremendously valuable part of the TMC team. His career started as an editor for CTI Magazine in 1996. Where he reported on the collision of the computer and communications spaces including what we called IP telephony back in the day. In 1997 we convened a meeting with Greg to explore whether it made sense to launch a publication in the IP telephony space. The outcome of the meeting was to launch what we hoped would become a cornerstone of what we hoped would be a new industry - Internet Telephony Magazine.

Greg became the editor of this publication and had the vision to see this is where the industry was going. Many companies in the communications space told us we were nuts for launching this publication as at the time there was no industry, just a few nerds calling each other on softphones.

Lo and behold, over the past decade this nerdy, niche technology revolutionized telecom to the point where business models have changed, new entrants have come into the telecom market and entire industries were transformed through international outsourcing made possible by inexpensive VoIP-based telephony.

In the last few years, Greg did a great job helping transform TMCnet into a major web force in communications and technology news. We are grateful to him for the years he has put in.

I am very happy for Greg as recently he has been given a great opportunity which involves a move to a new industry altogether. Galitzine has accepted a position with ISA, Inc., a prime contractor to the National Nuclear Security Administration and working in about 18 countries through Central and Eastern Europe to identify and interdict the illegal movement of materials for weapons of mass destruction. Greg will be taking his analytical and editorial skills to a higher level, contributing to national-level policy and operational support analysis for these major international nonproliferation undertakings.

While we all selfishly wish Greg wouldn't move on, we are happy for him and are sure he will make a tremendous impact in his new position.

As I have mentioned in the past, WiFi is becoming an important part of the carrier strategy and needs to be included in a bundle of products ranging from voice to wired broadband to TV. AT&T offers free WiFi to customers, Cablevision does as well. Now it seems Verizon is jumping on the bandwagon by potentially partnering with Boingo. Remember that AT&T purchased Wayport so that is one less provider Verizon can work with.

Availability of free Cablevision WiFi is getting more and more play... As you may recall I was recently interviewed by BusinessWeek regarding Optimum WiFi and today, David Pogue of the New York Times mentioned the service as well and pointed out this nifty coverage map.

It seems WiFi truly is becoming a strong competitor to WiMAX in many instances. We have learned from the past that every time we tried to kill off Ethernet, it kept evolving and getting stronger. WiFi is doing the same and just as every device had an Ethernet port in the past making the standard that much stronger, so many wireless devices from laptops to picture frames and smart phones have embedded WiFi as well.

The question becomes, how does the proliferation of free or bundled WiFi change adoption levels of LTE? And what about 3G? So far there doesn't seem to be a negative effect and perhaps this is because once you get used to surfing on the go, you want to do it in areas WiFi just doesn't reach.

It looks like Nortel could be gone as a standalone company in the next few weeks according to published reports. The news is sad but true. It looks like Avaya or Siemens could pick up the enterprise pieces. The optical division could go to Fujitsu, Huaweii, Alcatel-Lucent or potentially a private equity firm. The wireless unit could go to NSN.

What is terrible about the situation from my perspective is the communications and tech spaces are doing well relative to most other markets. In other words, this downturn for these markets has not been terrible. And there is a chance we could see these spaces bounce back faster than other industries.

This IMHO makes the Nortel assets very valuable as they are going for bargain-basement prices and their upside potential is probably good.

I should mention that some of the companies on the list above are not known for their customer facing marketing... If you are one of those companies you will likely not see the value from the assets you pick up.

The real value here is to put a better sales and marketing engine in front of some of the best engineering around. If that is done it will be the best possible outcome for employees, customers and the acquirers.

If you look at TMC from the outside and find yourself asking how you can get a job as an intern at this global integrated media company which builds communities online, in print and in person while gaining marketshare regardless of economic climate, I have some great news to share. We are looking for a small army of interns who want to learn what it's like to take on major multibillion dollar media companies with infinite resources and consistently win.

We will teach you how to sell collaboratively - how to listen and to be loved by your customers (well most of them anyway).

We will teach you integrated marketing and online marketing - not theory but ever-evolving practice.

If you love media and want to work at the company that is light years ahead online, contact us ASAP. We are very picky so if you aren't a super-hard worker and collaboration and hat-wearing are not your middle names, let's end our relationship now as friends (it's not you it's me).

One last thought about TMC - our culture is unusual - we have the financial stability of a 37 year-old company with the energy and enthusiasm of a start-up.

Let's just say if you're thinking of contacting us, please don't delay


Here's more:

The Sales & Marketing internship position at TMC is designed to provide hands-on experience that will be mutually beneficial for both the intern and the organization. The internship position is designed to challenge students and provide them with practical experience in the advertising and media industry.

TMC is looking for a dynamic, creative, enthusiastic, high energy professional to support the Sales organization, to help build advertising and marketing presentations for prospects and clients.

• Work with sales & marketing team to assist in the implementation of various campaigns
• Contribute to the creative input in building campaigns and support the campaigns
• Copyediting and proofreading
• Communicate with customers and peers
• Minimum Qualifications:
• Working towards completion of a college degree program in business, marketing or communication
• Excellent communication skills verbal and written
• Proficient in Microsoft Office suite, specifically PowerPoint and Excel
• Excellent communication skills
• Detail Oriented
• Initiative and proactive thinking
• Team player
• Ability to multi-task and work in a fast paced environment meeting deadlines

Check out my interview with Ronny Gorlicki of Comsys an israeli semiconductor company specializing in communications, who details the benefits of using his company's chips in WiMAX devices. Gorlicki shows off a number of interesting Comsys-powered WiMAX gadgets which are at different price points and aimed at different markets. One thing he touted to me about his company's solutions are that they are truly integrated FMC devices which integrate radio access seamlessly allowing you to network hop easily.
 

But what analysts may have missed is the fact that the iPhone is the stickiest phone in the history of the wireless business because of the App Store which enables these devices to be powerful pocket computing devices which run a plethora of applications. Sure, many applications are able to run across other platforms but they generally run less effectively as they other devices don't have the UI Apple does. Regardless, no other device has the plethora of apps that run on the iPhone meaning every day that goes by where new apps are developed, more consumers are effectively locked in.

On the wireline front, voice revenue is down 5.4% but the company added 359,000 broadband customers and 284,000 U-Verse TV customers. Revenue per household is actually up. Business revenue was down 4.4% which is not surprising when you consider the volume of layoffs in the last year.

Although AT&T is in control of its broadband and TV business, it is extremely reliant on Apple for wireless revenue. The company is also a master of marketing. They run ads which tout the quality of their 3G network and how it faster than the competition but it is clear to everyone I know that Verizon has a superior wireless network in virtually all parts of the country.

I have always believed that in marketing, perception is reality but it seems that consumer education is so great that people do not believe the multimillion dollar ad campaign AT&T runs touting its network as the best and fastest in the world.

After all, if people believed the ads, why are they mostly buying iPhones and not other devices? But AT&T has to keep building its wireless brand because if it loses iPhone exclusivity, its wireless unit could be doomed with a capital D.

Years back I stated Verizon made one of the biggest blunders in business history (corporate malpractice really) by not carrying the iPhone. I still believe this to be true. But Verizon has done a marvelous job of making its wireless network better and this is where the profit is to be made.

This morning I was reading an article from Seeking Alpha which compared AT&T and Verizon and in the post which Greg Galitzine summarized, it says the AT&T 3G network is better than Verizon. Here is the amazing part to me... No one ever in my life has told me their experience with AT&T is better than Verizon. And I ask constantly. In fact, people reluctantly switch from Verizon to AT&T in every case I am aware of. And this is in virtually every case because of the Blackberry Bold or iPhone. How is it this isn't common knowledge in the financial community?

Also, I should point out I carry a Verizon device and an iPhone because AT&T service has issues in so many places. I should also mention that on Metro North trains in Grand Central Station and between Connecticut and New York, AT&T is far superior to Verizon Wireless - but that's about it as far as I have seen.

So in the end, AT&T marketing seems to be influencing the influencers but it has to work on its network quickly to be considered a wireless carrier people don't reluctantly use.

And the company really needs to take wireless coverage more seriously because in 3-5 years, Internet TV will become a serious competitor to U-Verse meaning broadband and wireless will be the two areas of growth.