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Nortel-Huawei, RIP

Temper tantrum |


| LG.Philips Stock Hit

June 14, 2006

Nortel-Huawei, RIP

Bruce Einhorn

There was always something a bit puzzling about the partnership between Nortel and Huawei. The two longtime rivals last year agreed to team up in a joint venture to sell ultra broadband equipment in North America. (Thanks go to Heavy Reading for getting the details from the SEC filing.) But they waited several months to disclose word of the alliance. When they did, Nortel revealed news of the MOU on February 1 in the midst of the Chinese New Year, when Huawei and the rest of China was shut down for a week-long holiday. Now the joint venture is dead – and Nortel very quietly let the world know via an SEC filing.

I talked with Huawei’s official spokesman today and he confirmed the news. “It’s true that both sides have agreed to cancel the joint venture,” says Huawei spokesman Fu Jun. What changed over the past few months to cause the companies to scrap the deal? Would-be customers like AT&T and Verizon didn't show much interest in what the Nortel-Huawei JV had to offer. “The main reason is that some of the important carriers in the North American market already chose some other vendors in the related areas,” says Fu. “So both sides agree to cancel the agreed joint venture but explore some other ways of cooperation.”

02:50 AM


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The deal did not go through this time, but similiar alliance might re-surface later on across the pacific ocean. Given the trend of Telecommunication consolidation, the latest Nokia and Simmens, Nortel has no choice but to find mating partner in order to survive and compete effectively. At this point, HuaWei has no capability to take over powerhouses like Nortel largely due to the culture difference and management scale, the picture can be completely different in 5 years. The ill-fated deal unveils one truth- that the cost strucutre of traditional telecom equipment makers is losing business and makes it hard to compete as the price pressure is increasingly felt in the industry, and they start looking out other alternatives by partnering with the newcomer likes of Huawei and ZTE. It aslo proves that US market remains the toughest nuts for Huawei to crack as the heavyweight carriers resist its products and is reluctant to give the green light.

Posted by: Mitchell at July 4, 2006 09:08 AM

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