Nortel Networks' Chapter 11 bankruptcy filing will preserve the company’s cash pile, which will be used to provide support and service its customers, according to Nortel's head of enterprise sales.
"The $2.4 billion in cash we have is an important number to understand," said Joel Hackney, president of enterprise solutions at Nortel. "That money allows us to deliver products we have committed to customers and allows product support for customers."
Hackney said he was referring to switches and other networking gear that customers have agreed to purchase but that Nortel has not yet delivered. Some of the equipment might not be completely built or provisioned, and some might be waiting to be delivered at some cost.
Product support is an enormous ongoing cost for equipment suppliers and usually involves phone and e-mail contact with Nortel's support staff or its contractors in the event of problems.
Hackney said that as soon as the news was announced today, he began calling the CIOs at Nortel's five largest customers. "They had known about the $4 billion in Nortel debts for a while," he said. "They are savvy, and they get it and said they understand that Nortel is taking decisive actions to ensure it has support and R&D."
Hackney said that while some analysts might suggest that Nortel customers in line for an equipment refresh look for alternatives, he said those customers need to look at why they have always chosen Nortel.
"I'd tell a customer considering a refresh to assess whether Nortel gives you the best value for the progress of your business, does it interoperate with other equipment and give the return on investment," Hackney said. "Those are the same questions as always. I'm absolutely convinced that our value proposition is there as before and only gets stronger with financial protections."
Meanwhile, the International Nortel Networks Users Association pledged its support to Nortel, saying the Chapter 11 filing means the company will have the "opportunity to truly focus on strengthening the business."
The INNUA is composed of about 4,000 Nortel customers, three quarters of whom are based in North America. Victor Bohnert, executive director of INNUA, said that protecting the $2.4 billion in cash is "critical to Nortel customers." If a product was bought, it means it will still get shipped, he said.
"Chapter 11 is simply a restructuring tool, and Nortel is not going away," Bohnert said. He said he disagreed that now is the time to consider other vendors as some analysts have suggested. "Looking for another vendor may be reacting too quickly," he said.