Friday, April 07, 2006

Fasten your seat belt NT shareholders

Mike Zafirovski had a coming out party at CTIA-sort of. The CEO of NT made a rare public appreance at the CTIA conference making some bold statements. Mike wants NT employees to be "boy scouts" who would do the right things. I guess the Finance department is going to be outsourced going forward, since they have not been able to do the right thing for a while now.

Mike wants NT to exit every business where it holds less than 20% market share. In telecom that is a tough task, which most likely will lead to NT exiting bunch of businesses. By some estimates 65% of NT revenues come from businesses where NT has less than 20% market share . I am not a current NT share holder but losing 65% of revenue stream is going to be a one really bumpy ride. Surely, all the investment bankers are drooling over what this means to their bottom lines. The bankers can line their pockets by marrying NT with others so the combined entites can hold greater than 20% market share. Now you know why there are so many sell-siders covering NT- it's the banking fees and we all thought sell side research was "born-again".

I guess NT shareholders are hoping that Mike can do what Jack Welch (Mike was previously employed at GE prior to MOT) accomplished at GE. But GE is a congolomerate in everything from jet engines to electric turbines, NT is a telecom equipment provider. Maybe Mike wants to make the Canadian treasure into a congolomerate? Mike believes he can turn around NT in 3 to 5 years. Sorry but it's a very fast changing industry where customers are gaining more bargaining power with consolidation and competition is heating up with vendors marrying each other. A 3 to 5 year transition plans might work well in McKinsey consulting slides. But given Mike's resolve to turn NT around, it's worth a shot and value players can own the stock it's not what I can park my money in.


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