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Best Practices


When Acquisitions Bomb: Revisiting the Nortel-Bay Networks Deal

  • Written by The VAR Guy 1
  • December 15, 2008

The VAR Guy was intrigued today when he read Mark Evans' blog entry rehashing of Nortel Networks' 1998 acquisition of Bay Networks. Evans wonders if Nortel would have been smarter to acquire someone else. The VAR Guy has a completely different view on the deal. Here's the scoop.

Nortel Networks And Bay Networks: What Went Wrong
The VAR Guy was intrigued today when he read Mark Evans’ blog entry rehashing of Nortel Networks’ 1998 acquisition of Bay Networks. Evans wonders if Nortel would have been smarter to acquire someone else. The VAR Guy has a completely different view on the deal. Here’s the scoop.

Fact is, Bay Networks was broken before Nortel acquired the company for more than $9 billion. Anybody else recall that Bay Networks was formed by the merger of SynOptics (hubs and switches) and WellFleet (routers)? Bay Networks bombed from day one because of culural problems, distance issues (SynOptics was in Silicon Valley, WellFleet was in New England) and an aggressive, hyper-focused rival (Cisco Systems).

Alas, Nortel was a damaged company buying damaged VoIP goods in Bay Networks. Anyone can look back and say “what if” Nortel had decided to acquire someone else. But The VAR Guy believes Nortel would have botched any acquisition in the late 1990s and early 2000s. Even if Nortel made the right acquisitions, the deals would have yielded very little because Nortel destroyed itself — and its credibility — with accounting scandals during the dot-com implosion.

No use looking back. Time for Nortel to keep looking forward. The company has gained reasonable momentum in Unified Communications market, a growth market if ever there was one.

The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS and Twitter feed.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Best Practices Networking

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2 comments

  1. Avatar Rob Bissett December 15, 2008 @ 7:17 pm
    Reply

    This is an interesting blog. Being from Ottawa, I have been paying a fair amount of attention to the Nortel story lately (and the potential de-listing they face). I had a number of friends who worked there and who survived many rounds of “Tribal Councils” during the unwinding of that company. I recall Nortel being “the” place to work (and I can still see the “crystal palace” from my office). Everyone wanted to work there, and the ones that did were admired. If you talked to people who worked there though, the seeds of failure were always there. Nortel spent money like it was going out of style — tons and tons of money. Perhaps if they had exercised some better financial judgement in 2000, their offices wouldn’t now be mostly empty. Speaking to people who still work there is quite a story. Apparently morale is terrible, people hope to be let go so they can get the big package — that Nortel STILL gives, and you have to compete with your peers to stay alive.

    It is a very sad story for the company, shareholders, and the city.

    I can’t wait until someone writes the whole story. I am sure it will be quite a book.

    Rob

  2. Avatar The VAR Guy December 15, 2008 @ 7:32 pm
    Reply

    Rob: Mark Evans, author of the All About Nortel blog, is the perfect person to write the book on Nortel’s rise and fall. The VAR Guy hopes Evans pursues a book deal…

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