VARs back Nortel despite bankruptcy rumours

As reports claim Nortel has taken legal advice on bankruptcy, channel onlookers have asserted its partners remain steadfastly loyal, despite the vendor's well-documented troubles.

The Wall Street Journal reported this week that the Canadian firm has sought the counsel of lawyers. It is claimed Nortel did so to explore the eventualities of filing for bankruptcy protection, should the company's restructuring plans fail. It has also been reported that the telecoms firm has explored the possibility of seeking aid from the Canadian government.

The vendor's share price, which has lost 97 per cent of its value over the course of 2008, has been dealt another blow by the reports. It fell to as low as $0.40 on the New York Stock Exchange yesterday, despite Nortel claiming "no bankruptcy filing is imminent".

Nortel issued a bullish statement, insisting it was pushing on with its cost-cutting initiatives.

It said: "Nortel is hard at work reshaping the business to even better serve our customers. There are those who fuel negative speculation, but there are many more who believe that Nortel has put in place the necessary plans to strengthen our financial footing and reset our cost base."

It also sought to reassure VARs and customers that they were in safe hands for the foreseeable future, adding: "Nortel is a viable partner for the long term. We have no debt maturity until 2011, and we are preserving and strengthening our cash position. On 10 November, we put in place an aggressive plan to bring down costs by $400m with a minimum level of cash outlay. The goals we laid out on 10 November have not changed. We remain focused on executing a significant shift to our operating model and cost base to reflect the economic environment that we are now in."

Darren Boyce, managing director of Nortel Gold Solutions Partner Applinet, told CRN the vendor had been more supportive of partners than ever during a testing 2008.

"Most of our business is in the enterprise sector and Nortel is growing in that space," he said. "You would have to be naïve to say that you are not concerned about (the speculation), but Nortel is a $10bn company with a lot of heritage and a lot of loyal clients and customers."

Barrie Desmond, director of distributor VADition, claimed rivals could face a stiff test in attempting to woo Nortel VARs away from the vendor.

"Nortel has a very strong brand, an end-to-end product portfolio and high ratings of loyalty, " he said. "What you will find with its partners is they are dyed-in-the-wool Nortel resellers. Guys on the fringes might be converted but most Nortel VARs are really loyal."