Nortel Networks reported a net loss of $3.5 billion on
October 18.
By any standard, that's a stunning decline, upstaged only by its loss in
the previous quarter of $19.4 billion. The Canadian company is
also in the process of laying off half its workforce, reducing it from
95,000 to 45,000.
What happened? A timeline of Nortel published by The Financial Post
offers a glimpse at Nortel's rise and fall. The company reached a share
price high in July 2000, hitting $123.10. But stocks plummeted
26% after third-quarter results were released, and the company never
recovered, even when it met expectations in January 2001 with year-end
revenues of $8.89 billion.
As of October 22, 2001, the shares were trading at $5.56.
Nortel and many of its competitors borrowed money to try and compete in
what they saw as an endlessly expanding universe. "The increase in
borrowing by the (telecom) industry over the last three years eclipsed
the total national debt accumulated by Britain in the past two hundred
years," reports The Financial Post.
Business customers just aren't spending as much money on telecom systems
anymore. Nortel's new president and CEO, Frank Dunn, spoke briefly about
the state of the market in the earnings release: "While we believe we
are beginning to see early indications that capital spending by service
providers is approaching sustainable levels, it still remains difficult
to predict."
Nortel is far from alone in its pain, and the downturn has hit service
providers, device makers, and equipment companies alike. The b-to-b
market is a tough neighborhood all round, with shrinking budgets and
interest in creating whole new telecommunications systems evaporating
among customers.
"Telecom was part of the whole bubble that went on in 1999 and 2000,
with enthusiasm about the requirement for bandwidth coming about from
the increased use of the internet, and the transition in the economy
that was driven by electronic transmissions," explains Berge Ayvazian,
CEO of The Yankee Group, a research and strategic consulting firm
specializing in communications technology. "Reality stepped in at the
end of 2000, and it's been a very rapid decline."
As a result, the whole industry is in crisis mode. But PR strategists in
agencies and in the companies themselves have been finding targeted ways
to reach commercial customers, and convince them that telecom technology
and services offerings are still vital to doing business.
Change amidst decline
The market is changing so rapidly these days that companies are revising
marketing plans on a monthly basis, rather than once every six
months.
One of the reasons for this is a constantly changing field of
competitors, with companies like Covad Communications and NorthPoint
going out of business and leaving customers in the lurch.
"One of the messages that we are trying to hammer home is financial
stability," says Chad Couser, manager of PR for Cable & Wireless. "This
company actually has no debt and we have money in the bank. That's a
message we try to communicate as much as we can."
Businesses are also less interested in hearing about the bells and
whistles of a particularly technological innovation. During the boom, it
was possible for companies to talk in broad theoretical terms about the
future of technology and the impact that continued innovation would have
on customers.
No one cares about the theory anymore. "Customers right now don't think
their major concern is technology," Couser adds. "They are interested in
solutions to help them, not in one particular technology."
The past year has not been a total disaster for newcomers, however.
Until recently, AltiGen Communications, which provides IP and PBX call
centers for businesses, was a relatively unknown player in the market.
But together with its agency of record, Neale-May & Partners, the
company has mounted a successful PR push for the past year.
By leveraging the media audience at trade shows and traveling across the
country to meet with reporters and analysts, Richard De Soto, AltiGen's
SVP of marketing and sales, and Neale-May have helped the company get
the attention of Gartner Dataquest, which ranked it number one in its
sector. To put that in perspective, numbers two and three were 3Com and
Cisco Systems, respectively.
One of De Soto's strategies is to use the IP technology during
interviews, so he is talking to reporters over the internet. "I'm
calling you from an IP line," he says with a laugh. "People used to
think that it was a really bad transmission on IP lines."
Still, De Soto admits that great PR has yet to really impact the bottom
line. "Brand awareness still has to occur," he says. "We need to have
more stories in the media about success with collecting clients. That is
probably one area where we have been weak."
CloudShield's challenge when it launched was to get analysts to
recognize its "packet processing" technology, which is designed to speed
up the systems of telecom providers. Taking on a three-step approach,
CloudShield and its PR agency, Launch Squad, first targeted industry
analysts, then key editorial contacts, and finally, the customer
community. "The collective weight of that helped put us on the map,"
explains Dave Clauson, founder and VP of marketing.
One strategy that is consistent across most of the industry is
recruiting customers to endorse the value of the company's products and
services.
"We spend a good deal of our effort when preparing announcements in
finding a customer who is willing to talk," says Walt Gasior, PR
director for AT&T Business, managed services. Customers may be
interviewed by the media, or prepare testimonials to be included in the
press release. "It's important because it gives substance to the fact
that what you are offering is valued by the market."
Nextel takes it one step further, inviting customers to speak at
conferences where the company is making a technology presentation. "They
can give their real-life experiences; they speak the audience's
language," explains Audrey Schaffer, Nextel's director of corporate
communications. "A lot of our customers are willing to talk about it
when they know that their own customers will be reading it. It allows
them to be viewed as being on the cutting edge."
Employee communications
Nortel is not the only company laying off staff. Qwest Communications,
Cisco, AT&T, and Verizon are just a few that have also added to the
unemployment rolls. While layoffs may be perceived favorably by the
market, and viewed as a financial necessity, companies need to take a
strategic, long-term view on how they treat employees.
"Employees are shaken," says Zanku Armenian, SVP and head of Brodeur
Worldwide's telecom practice. "Companies need to think about what we can
do to invigorate them."
Armenian says that in the current climate, companies have to pay greater
attention to employees and other constituencies that were neglected
during the boom, including customers, business partners, and
investors.
"We've typically focused on media relationships before. That has
changed," Armenian says. "On top of that, the media wants more concrete
news."
And the media will recognize poor management of key constituencies. "The
business press wants to know who is in charge, and why they are good
leaders," says John Metzger, CEO of Metzger Associates. Retaining the
best employees and providing honest, clear information on the company's
outlook will keep employees engaged, and make them good references for
the health of the organization.
Working together
The telecom players may have to abandon some of their cutthroat
competitiveness and find ways to come together as an industry to find
solutions to their problems. Ayvazian of The Yankee Group likens it to
the apparent end to bipartisan political squabbling that has occurred in
Washington, DC following the September 11 terrorist attacks. "There
needs to be an ability to get behind one initiative," he says.
To that end, The Yankee Group is developing a program called The Fifth
Utility, with the intention of bringing telecom players together to
develop a communications response to the new demands of a country
fighting terrorism.
"What's really missing is the infrastructure to allow information to be
exchanged and utilized effectively," he says. It is a problem, he
thinks, that the industry can come together to solve.
"What a boon to the telecommunications industry it would be for them to
work together," Ayvazian maintains. "To create a common project for
them, to get them working together, rather than squabbling over things
like whether the DSL market should be open to competition."
However, that will require stronger communication.
TELECOM AGENCIES
Rank Agency Name Telecom Revenues
2000
1 Fleishman-Hillard 12,702,000
2 Ketchum 9,097,000
3 Porter Novelli 9,077,000
4 Brodeur Worldwide 8,000,000
5 GCI Group/APCO Assoc. 6,023,657
6 Edelman Worldwide 5,831,896
7 Ogilvy Worldwide 5,536,900
8 PR21 3,710,274
9 KCSA 3,500,000
10 Sterling Hager 3,237,423
11 Magnet Comms 3,137,000
12 BSMG Worldwide 2,842,519
13 The MWW Group 2,508,555
14 Applied Comms 2,200,000
15 Publicis Dialog 2,171,259
16 Neale-May & Partners 2,100,000
17 Sterling Comms 2,000,000
18 Earle Palmer Brown/PR 2,000,000
19 A & R Partners 1,800,440
20 Wilson McHenry 1,800,000
21 Cohn & Wolfe 1,793,000
22 Gogerty Stark Marriott 1,729,340
23 Gallagher PR 1,665,530
24 Chen PR 1,413,150
25 Gibbs & Soell 1,334,290
SOURCE: Council of PR Firms Auditing: No audit was required for
inclusion in the rankings. The CEO/CFO/principal was required to sign a
statement verifying the accuracy of the data and agreeing to possible
participation in a random audit Disclaimer: While every effort has been
made to ensure the accuracy of these figures, PRWeek cannot accept
liability for, nor make financial guarantees based upon the information
in this chart.
