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Live blogging on the Nortel AGM

By Bo Gowan May 7, 2008 9:01 am EDT

Today in Ottawa, Nortel is holding it’s Annual Meeting of Shareholders — better known to some of you as the Nortel AGM. Among other activities, Nortel president and CEO Mike Zafirovski will speak to shareholders. For those of you who can’t attend the event, I will be “live blogging” with this post throughout the meeting (which is set to start at 10am ET).

So check back on this post regularly, most recent updates will be at the top:

  • 2:01 PM ET - This new article in Reuters focuses on Mike Z and Bill Nelson’s comments around the possibility of Nortel being involved in future M&A activty.
  • 1:37 PM ET - Coverage from CTV in Canada
  • 1:03 PM ET - with most of the action done for the day, I have a chance to ask for feedback.  Was this useful?  What would have made it better?  Your thoughts are appreciated.
  • 12:53 PM ET - Pic below: Mike Z and others walk to the media Q&A after the shareholder meeting ends.

 

  • 12:35 PM ET - Thumbnail pics below (click for full view): reporters at the event ask Mike Z questions during a quick media Q&A session right after the shareholder meeting concluded. Also with Mike Z is Ronald Alepian, VP of corporate communications for Nortel.

  • 12:27 PM ET - One question during the Q&A was around Sprint’s WiMAX network and the possibility of Nortel being an active player. If you haven’t seen the latest news on Sprint’s plans, GigaOM had this blog post that Sprint and Clearwire were about to link up on Sprint’s Xohm WiMAX service with an announcement as soon as today.
  • 12:20 PM ET - Pic below: a question from a shareholder during the earlier Q&A portion of the meeting.

  • Early article from the Canadian Press
  • 12:04 PM ET - the event is over, but this blog is still going, will have additional pictures, summary of coverage, and possible additional thoughts…
  • 12:00 PM ET - meeting has concluded. The meeting is adjourned.

  • 11:53 AM ET - Mr Pearce is now going through a few final procedural and voting results items
  • 11:51 AM ET - No further questions - Q&A portion of the event has ended.
  • 11:48 AM ET - Question - Why are we not in the cell phone market? Mike Z - cell phones are part of a larger industry. Our focus recently has been to narrow our focus…to get in the handset business would not be wise for us at this time. But we do enable these networks. We also do provide devices to enterprises (for hotels, etc) …but we are not looking to expand into consumer mobile handsets.

  • 11:47 AM ET - Question on current status of previous executives no longer with Nortel why they are not being prosecuted. Harry Pearce: Continuing criminal investigations ongoing in the US and Canada with respect to those individuals. Nortel has also initiated civil litigations to recoup some of those bonuses. Unfortunately the wheels of justice turn very slowly, but they are turning.
  • 11:45 AM ET - Question: Question related to human rights worries in China…Two of our largest competitors are in China…we’e made Beijing one of our centers of excellence…why building our presence in China? Harry Pearce - we are a strong supporter of human rights. To really make progress on the human rights front, we are well-positioned to ensure communications are flowing world-wide. The more infomation flows, the more likely ther will be reforms. Why are we in China…we have to be. We have to have some of those lower cost bases to compete. Having a presence can we think constructively influence people in a positive way. Having a presence can be constructive, but we are very attentive to individual projects from a human rights perspective. Mike Z - we operate in 150 countries worldwide. 12 locations with more than 500 people worldwide. We have a wide and balanced footprint…we can’t ignore a country like China.
  • 11:38 AM ET - Mike Z - the turnaround has started (for Nortel) 18 months ago…Dissapointed in the stock price, but it’s difficult to predict stock price in the short term.
  • 11:34 AM ET - Mr Pearce - we have stated that we are looking at a 3-5 year turnaround. I can assure you Mike and his team are hard at work. If there is any management team that can execute, it is this team. The board is extremely confident in Mike Z and the team.
  • 11:32 AM ET - Mike Z - confident we are going to start showing progress and results in the second half of 2008. There are significant headwinds…there is skeptisism.
  • 11:31 AM ET - Question follow-up: Are you buying shares on the open market? Mr Pearce: buying on the open market. Mike Z has bought more than $1.5M in stock on the open market in less than a year.
  • 11:30 AM ET - Question: Why is the stock price going down. For such a nice big company, what is wrong with it? I believe in your company, but I don’t understand. Answer: Mr Pearce - we do believe in this company. Evidence of that - Mike and I invested an additional half million in it in April. Look back and see where Nortel was before….was a troubled company going through multiple restatements. Were downsizing…major restructuring…every director you see today was not a director back in those years….doesn’t happen overnight. Mike Z and team is building a foundation, sometimes those foundations aren’t immediately visible. … it takes time to deliver financial results from that foundation. We have one of the best management teams in the industry (that Mike Z has build). But the market isn’t going to believe it until we deliver sustained growth. Worst is behind us. No longer any material weaknesses, all class actions settled, settled OSC investigation…now back to business, but that took years to resolve.
  • Note that I am paraphrasing for all Q&A comments that follow…
  • 11:20 AM ET - Question for Mike Z: Industry development, Sprint and Clearwire joining for WiMAX. In the past the impression is that Nortel was not a player in this network. Is there now an opening there? Mike Z - Two comments - very good news for the future of Hyperconnectivity…pent up demand for broadband wireless… with respect to our relationships, we are working with Clearwire on a couple of activities, and Sprint is a very good CDMA customer.
  • 11:18 AM ET - Procedures have completed. Q&A is now starting…
  • 11:16 AM ET - The Nortel press release highlights multiple Nortel customer quotes. Of interest is this one from Verizon: “Nortel has been an important partner to Verizon since we first launched CDMA services,” said Dick Lynch, Verizon’s executive vice president and chief technology officer, separately. “They have been with us every step of the way as we’ve built the most reliable wireless network in the U.S. With the explosive uptake of broadband services we’re seeing today, we are already anticipating the need to move to the next generation of mobile networking. We’re pleased to be working closely with Nortel this year to trial LTE and confirm its performance.”
  • 11:13 AM ET - Nortel just issued this press release outlining some of Mike Z’s comments at the Nortel shareholder meeting.
  • Pics below: first a view of the AV set-up for the event…second Mike Z backstage before the event.

  • 11:02 AM ET - FYI - Mr Pearce is still leading motions and approvals…more pics coming from behind the scenes…
  • Pic below - Nortel’s Exec VP of Global Sales Bill Nelson before the event. Philippe Morin and John Roese are in the background.

  • Pic below - left to right: Gordon Davies, Harry Pearce, Mike Zafirovski, and Pavi Binning

  • 10:51 AM ET - now going through board election procedures.
  • Below pics - first Mr Pearce speaking earlier at the beginning of the event. Second, Mike Z speaking.

  • 10:45 AM ET - Mike Z closes his speech, turns it over to a video
  • 10:43 AM ET - Mike Z paraphrase - A new picture of Nortel is emerging. One that is confident, innovative, passionate — working with our customers and partners to build the future of communications.
  • 10:42 AM ET - Mike Z paraphrase - So, what will you see Nortel do in 2008? In a word, accelerate.
  • 10:40 AM ET - Mike Z paraphrase - Examples of how we are becoming a much better partner. Our Nortel-LG partnership has had an amazing takeoff with tremendous growth in Korea.
  • 10:37 AM ET - Mike Z paraphrase - By working with partners such as Microsoft and IBM, we are creating the convergence of IT and telecom. Nortel, as the expert on communications, can be an inseparable part of that.
  • 10:35 AM ET - Mike Z paraphrase - Our Business Transformation efforts will yield $1.5B in savings by the end of this year.
  • 10:34 AM ET - Mike Z paraphrase - Over the last year, we have continued to put together an exceptionally strong and experienced management team…important additions in 2007…CFO, Pavi Binning… EVP of Global Sales, Bill Nelson…CIO, Steve Bandroczak
  • 10:33 AM ET - Mike Z paraphrase - We have been making substantial progress against our six-point transformation plan….We are driving to an increasingly efficient cost structure and quality levels. We are targeting key markets where we believe we can be relevant and gain share.
  • 10:31 AM ET - Mike Z pic below speaking at the Nortel shareholder meeting

  • 10:28 AM ET - Mike Z turns it over to a customer video preso…
  • 10:26 AM ET - Mike Z paraphrase - Every one of the top 25 service provider networks in the world are Nortel customers.
  • 10:24 AM ET - Mike Z paraphrase - I know there is some skepticism around our ability to achieve our goals in this marketplace. want to assure you…we understand the current environment, and its related challenges and opportunities. We do see the potential of this company… and I believe we are on the right path to rebuild our company the right way.
  • 10:23 AM ET - Mike Z paraphrase - As we reported last week, we remain on track to achieve full year 2008 guidance…in a time of market changes and increased competitive pressures.10:22 AM ET - Mike Z paraphrase - Revenues for 2007… adjusted for UMTS… were up 2%. Following a 13% growth in the second half of 2006… Q1 2007 growth was 11%.
  • 10:21 AM ET - Mike Z paraphrase - now have 7 consecutive quarters of operating margin improvement.
  • 10:20 AM ET - Mike Z - Our industry today is a tough battleground with several challenges. Convergence is here - based on open standards and the blurring of lines across telecommunications, IT and media. The resultant consolidation among our customers is adding pressures in pricing…. and despite some consolidation among our competitors… there are still too many companies in our space. These are the hallmarks of an industry that is in transition.
  • 10:17 AM ET - Some paraphrasing of Mr Pearce’s Mike Z’s comments: I believe we will be successful in navigating to 4G technologies as part of our business…
  • 10:15 AM ET - Mike Z introduced and now speaking…
  • 10:13 AM ET - Mr Pearce is now introducing the Nortel directors
  • 10:11 AM ET - Some paraphrasing of Mr Pearce’s comments: Level of customer engagement is encouraging…We have gone from 6 material weaknesses in internal controls for financial reporting to none….strong continued focus on corp governance is being recognized in the industry by independent experts…
  • 10:10 AM ET - “We are regaining a day-to-day operating rhythm, something we haven’t had in quite some time” — Harry Pearce
  • 10:07 AM ET - Gordon Davies is Nortel’s Deputy General Counsel
  • 10:05 AM ET - Just getting through a few opening guidelines and “forward looking statements” disclaimers before the real comments begin. Gordon Davies giving those.
  • 10:03 AM ET - Harry Pearce is of course Nortel’s Chairman of the Board
  • 10:01 AM ET - We’re starting - Harry Pearce is speaking…
  • 10:00 AM ET - Two VIPs discussing the set-up

  • 8:54 AM ET- First pic below is the “control area” for all the A/V requirements. Second pic is the auditorium area before it started filling up. The event is in Ottawa in Nortel’s Carling Lab.

  • 9:37 AM ET - pics of the event auditorium coming…
  • 9:16 AM ET - While we’re waiting for the action to start - if you’re interested in LTE/4G and saw Nortel’s announcement Monday setting our royalty rate for LTE IPR, you might be interested in this article. Nortel’s Scott Wickware talks to Telephony Magazine about the announcement, and gives some detail not provided in the release.

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Comments

  1. thank you Bo for the AGM breakdown

    I am however a little confused with the statement that Mike made

    “0:35 AM ET - Mike Z paraphrase - Our Business Transformation efforts will yield $1.5B in savings by the end of this year.”

    what does he mean by this statement exactly?

    originally I interpreted it as $1.5 eventually hitting the bottom line minus taxes and interest on debt,but when taking that statement into consideration,how is that to be possible when their calling for 2008 OM to come in 300 basis points better than 2007 to about 6.7 percent.

    6.7 percent translates to $750 m in operating profit.

    Can you possible clarify on this?

    thanks again Bo for your efforts

    May 7th, 2008 at 3:06 pm by Bill Stock

  2. Hey Bill - your question isn’t one I can answer on my own. I’ll need to talk to someone in the know…I’m working on it.

    May 7th, 2008 at 3:34 pm by Bo Gowan

  3. Bill - Mike Z’s comment on $1.5B in savings by the end of this year goes back to his previous comments over the last few years on Nortel’s restructuring and cost reduction efforts — where Nortel estimated that various restructuring and cost reduction activates would result in $1.5B in OM expansion by the end of 2008.

    So Mike’s comment isn’t a claim of $1.5B in improvement in 2008 over 2007, but an update that we are on track to achieve the broader goal of $1.5B improvement from where we stood a few years ago. Additionally, the $1.5B is a gross improvement number, some of which is expected to be offset by costs including: increased employee compensation, re-investments, etc.

    May 7th, 2008 at 4:45 pm by Bo Gowan

  4. Thanks Bo -Though it kind of has me wondering as Operating margin is defined as the portion of revenue left over after paying for variable costs of production such as wages, raw materials, etc.

    So based on the estimated OM expansion goal of $1.5B before the usual taxes and interest on debt,I wonder how much of that left over will be reallocated towards those costs that you mentioned -employee compensation, re investments etc…

    I would say at this stage of the Business Transformation Plan,it is important for Nortel to ultimately start showing real profits and positive cash flow from these restructuring efforts.

    Mike in the press had commented today that he was disappointed with where the shares are at,and I think what I pointed out is in large part of the reason why the shares have fallen to these levels inspite of all the improvements that have taken place so far.

    Analysts as well are all over the map when trying to assess what Nortel shares should be worth- it would be nice to see Nortel report a qtr without the usual “one time” charges that have been the norm for the last few years.

    If only 1/3 of that estimated $1.5B in OM were to hit the bottom line then Nortel would be worth at least 1 x revenue or about $11B market cap-still below industry average,but I would imagine Nortel’s shareprice would be viewed as a more respectable form or currency for any potential acquisitions that may help it accelerate its growth curve.

    thanks Bo again- your efforts are always appreciated

    May 7th, 2008 at 6:04 pm by Bill Stock

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