Don't panic and rip out your Nortel gear, but if you are upgrading, look for alternative suppliers.
That's the advice of analysts who follow the Canadian-based network equipment provider, which filed yesterday for protection from creditors under Chapter 11 of US bankruptcy laws.
Chapter 11 law is designed to give companies in financial trouble some time to organise a plan for paying off debts. But having Nortel in Chapter 11 can pose a problem for the CIO that has entrusted its networks to the company.
The company has been in serious financial problems for four years, prompting Zeus Kerravala, an analyst at Yankee Group Research, to say, "If I was a board member of a company using Nortel for mission-critical needs, I'd be asking the CIO what the hell they were doing."
While Nortel has aid that the Chapter 11 filing will help it protect what cash it has. But Kerravala said. "When they come out of Chapter 11, they may look a lot different, but during this period, Nortel won't invest in small companies with innovative technologies."
Jack Gold of J.Gold Associates said that large Nortel customers need to carefully weigh what is happening. "If I were a big company using all kinds of Nortel gear and I was facing an equipment refresh, I'd be very hesitant to use Nortel," he said
In a video address on the company's Web site, Nortel CEO Mike Zafirovski addressed Nortel customers head-on, assuring them that Nortel is "100% committed to customers" and that Nortel employees "all remain very committed to the future of Nortel."
Zafirovski said that Nortel, a traditional supplier of telephone network infrastructure gear to network carriers globally, has made "significant progress in the last three years" since his arrival as CEO, and had done well in sales of wireless technology, 40 Gigabit Ethernet switching and unified communications products.
But the analysts said Nortel hasn't done enough to move beyond its legacy as a telecommunications carrier switch provider and to show advantage in innovative technology areas.
While its products are well engineered, Kerravala said Nortel was not an innovator. "Nortel is not seeing market transitions happen, and while they do make good products, they haven't led in things like voice over IP," he said. "Where can Nortel lead?"