It took a day for Nortel analysts to get a handle on the company's US$455-million all-cash acquisition of PEC Solutions but there is now a verdict: they hate it. It has been quite some time since I've seen so many analysts be so negative about an acquisition but it was all there in black and white as the research started to surface. So what don't they like? For starters, they are having a difficult time figuring out why Nortel would buy an IT services business in a market - the U.S. government - that is growing by 4% a year. Nortel is buying 1,700 people so it can sell more telecom equipment to the U.S. government. The big problem with people - unlike hard assets - is they tend to leave. While it is important to be able to service clients, the feeling is Nortel could have better off focusing on a more dynamic market.
The most damning part of the analysts' critique today was the focus on whether Nortel CEO Bill Owens is the right person for the job, and the company's inability to articulate a vision for the future. Scotia Capital Gus Papageorgiou was the most blunt when he essentially accused Owens of being in over his head and falling back on his own background - U.S. military - in making such a major purchase rather than what is good for Nortel. For an equity analyst, this is , but refreshing, behaviour.
Hopefully, Nortel will offer some insight into its big-picture plans by Friday, which is the self-imposed deadline it set to release 2004 fourth-quarter and full-year results. Analysts have a lot of questions and growing concerns. With the analysts picking apart Owens' first major strategic initiative, you wonder how long it will be before Gary Daichendt, Nortel's highly-regarded president and COO, gets the CEO job.

Do you really think people will watch a 30-minute sit-com on a wireless device? It's not something I would ever do but some analysts believe there are couch potatos who will need to get a TV fix while on the road. ABI Research's Alan Varghese is a mobile TV believer, although he concedes most usage will be short video clips. He said, however, that "for die-hard fans, watching their favorite half hour sitcom is not out of the question." Varghese also throws out a physical theory about mobile TV's potential, suggesting the optimum TV viewing distance is 5x the screen size. Using this formula, he argues mobile devices are perfectly suitable for on-the-go TV. What may put Varghese and I in different camps is I don't watch much TV - other than Deadwood, Arrested Development and - when the NHL is not on strike - the Toronto Maple Leafs. As a result, it may be difficult for me to relate to people who may watch 10, 20 or 30 hours of TV a week. For these people, maybe the ability to watch "Survivor" or "Desperate Housewives" while you're waiting to catch a flight is a pleasure worth paying for - even if it means looking at a small screen. You should never under-estimate how the mass market behaves, and never under-estimate the power of TV. In other TV-related news, I was listening to CBC radio today about a device called TV-B-Gone that lets people to turn off TVs in public places such as bars and restaurants. It was interesting to hear there was little reaction when a TV was turned off in a bar - suggesting TV can often be more background noise than anything else.

According to research done by Sandvine Inc., there are more than 1,100 VOIP service providers around the world - ranging from large telcos and cablecos to local "mom and pop" operations and free services from firms such as Skype. Sandvine came up with this eye-catching statistic after analyzing data traffic moving across its global network of ISP customer sites, which account for more than 20 million broadband subscribers worldwide. Sandvine, which provides a variety of services to ISPs such as traffic management technology, said the growth of VOIP traffic means there will be serious quality of service challenges to broadband service providers. "The failure or success of VoIP offerings depends on the level of QoE that a service provider can achieve and sustain, so network managers must determine very quickly how QoE can best be quantified and ensured," Sadvine opined in a press release. Om Malik makes an excellent point that if you assume there will be three million VOIP subscribers in the U.S. by the end of 2005, and that the cablecos and Vonage will have two million customers, it leaves hundreds of VOIP SPs battling it out for the rest. Yikes! For people not familar with Sandvine, its founders started a company in Waterloo, Ont. called Pixstream Inc., which was acquired for nearly US$400-million in 2000. Four months later, Cisco closed Pixstream as part of a corporate restructuring that saw the elimination of 8,000 employees. It was a strange move given Pixstream was originally only looking for a small investment from Cisco but the deal expanded when Cisco made it clear it wanted the whole kit and kaboodle.