Can we Learn from the Nortel Fire Sale?

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.

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