One major reason why Nortel Networks Corp. filed for protection from its creditors in the U.S. and other countries today was to preserve $2.4 billion in cash, which the company plans to use to provide support and service its customers, Nortel's head of enterprise sales said Wednesday.
"The $2.4 billion in cash we have is an important number to understand," said Joel Hackney, president of enterprise solutions for Nortel, in a telephone interview. "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 a customer has 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 email contact with Nortel 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 suppport and R&D."
Hackney said that some Nortel employees and others might have been shocked by Wednesday's news.
"We regret the impact this could have for some of our stakeholders and we know this is disturbing for employees to go through an unknown process, that's clear enough. Once we work through the emotion, though, we know this is the right decision ... for long term success."
Hackney said that while some analysts might suggest that Nortel customers in line for an equipment refresh consider an alternative provider, 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."
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