This story was written by Keith Dawson for the Industry Standard's Media Grok email newsletter. It is archived here for informational purposes only because The Standard's site is no more. This material is Copyright 1999-2001 by Standard Media.

MEDIA GROK
Nortel Bails on DSL

May 11 2001 08:38 AM PDT

The Canadian telco leaves the high-speed Internet access business much more quietly than it went in.


The Canadian telecom company made no announcement, but reporters learned of a layoff in Fremont, Calif., and dug up the story that Nortel's is closing Promatory, the promising startup it bought last year for $778 million. Nortel spokesmen confirmed that the company is no longer supplying DSL equipment for high-speed Internet access.

Promatory made DSL equipment to install in telephone company switching offices. It promised to deliver multiple streams of phone and Internet service into customers' homes. Trouble was, Nortel got into the DSL business late and never expanded it much beyond $100 million a year, according to CNET, a figure that places it fifth in the pecking order. CNET named the French giant Alcatel as holding down first place in the worldwide DSL market.

The Wall Street Journal neatly explained the nub of Nortel's difficulty in marketing its DSL technology. Mark Heinzl quoted industry watcher Dave Burstein, who said that Promatory's technology "only found a market with the [competitive local exchange carriers, or CLECs], and when [many of] the CLECs died, it died with it." In other words, Promatory never caught on with the big Baby Bells.

Most outlets covering the Nortel story rehearsed the company's 20,000 layoffs since the beginning of the year. Nortel spokesmen said that the closing of Promatory was included in that overall figure.

Toronto's Globe and Mail ended its coverage with the speculation of unnamed analysts that many of the "acquisitive giants" (Nortel, Cisco and Lucent) may be "considering a massive writedown of good will on their balance sheets" - writing off the difference between what they paid for their acquisitions and what they were actually worth.

A second Wall Street Journal story put the Nortel decision in perspective by offering a broad overview of the worldwide debacle building in the wake of the telecommunications industry's massive debt. Reporters Gregory Zuckerman and Deborah Solomon warned that the ongoing meltdown could be "one of the biggest financial fiascos ever ... with losses to investors expected to approach the $150 billion government cleanup of the savings and loan industry a decade ago."

Nortel Shuts Down Its DSL Division
CNET

Nortel Dissolves Its DSL Division As Part of Ongoing Restructuring
Wall Street Journal
(Paid subscription required.)

Nortel Shuts Down Promatory
Globe and Mail

Telecom Debt Debacle Could Lead To Losses of Historic Proportions
Wall Street Journal
(Paid subscription required.)