Obviously putting aside the recent restatement and the surprising departure of its CFO, CRN Australia has a glowing story on Nortel called “Is this Nortel’s Year?” that puts the spotlight on the fine folks within Nortel’s media relations group. According to the article, CEO Mike Zafirovski is doing a great job, Nortel’s enterprise efforts are starting to gain momentum and its channel partners are getting more enthusiastic. Of course, this may be all true but the rule about Nortel that everyone should have learned in recent years is you need to throttle back your enthusiasm just in case.
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Nortel unveiled another part of its IP-TV strategy with the launch of a set-top box for carriers looking to offer television services to consumers. The box, which will be built by Nortel’s LG-Nortel joint venture, could put an end to speculation that Nortel is looking to make an acquisition to get into the business, which includes rival such as Cisco and Motoroal. Nortel has been using Cambridge, U.K.-based Amino Communications as a set-top box partner. Consultant Rob Enderle told LightReading that Nortel could established a foothold in the set-top box business by making it work extremely well with other Nortel gear used by carriers – thereby making it difficult for rivals to get into the market. “You only have a few companies in each geography that can sell products of this class, so you could have a chance to lock someone out,” Enderle says.
You know the IP-TV business is getting serious when there’s an IPTV World Forum happening in London. Of course, Nortel will be there demonstrating “how real-time multimedia and entertainment services can be converged onto the TV to improve the user experience by providing greater control over the home communications environment.” Nortel will also unveil a new partner for developing new TV services.
On the IP-TV front, the biggest news recently was Ericsson’s intention to buy Tandberg TV for $1.4-billion – a 10% premium to Arris’s offier. In a recent report, UBS Securities said Ericsson’s flurry of IPTV deals recently illustrate how serious it has become about the business, although the investment firm suggests integrating these purchases may be a challenge. Of the other big telecom suppliers, UBS said Alcatel/Lucent may have to respond to Ericsson’s move by acquiring encoding/video-on-demand technology, while Cisco is well-positioned. UBS said Motorola lacks edge routers, metro and access technology, Nokia-Siemens’ portfolio does not include encoding/VOD and edging routing, while “NT’s competitive position in IPTV remains weak”.
“While Nortel’s public stance is to compete in the IPTV market, its competitive position is very weak in our view as it only has the Metro transport part of the solution,” UBS said. “While the company could pursue acquisitions to quickly enter the IPTV market, there would be many product holes to be filled in, including Access, Edge Aggregation/routing, Encoding/VOD, and Middleware, making any entry in to the IPTV market tough and likely irrational in our view. We believe Nortel shareholders would not view acquisitions in the IPTV market favorably.”
Update: Accenture recently released a study on IP-TV. Not surprisingly, more than half of communications industry executives believe IP-TV can generate significant revenue within the first three years of service.
As part of its strategic focus on IP-TV, Nortel has entered into a joint marketing agreement with Calix. (Nortel has had a strategic alliance with Calix). Here’s LightReading’s take on the news:
Like Ericsson, Nortel knows it needs a strong access infrastructure story if it is to be a significant player in the IPTV market, and will likely need to do more if it is to meet its own competitive criteria: CEO Mike Zafirovski is only interested in competing in markets where Nortel can be one of the top two players, or command a 20 percent market share.
Other than with Calix, Nortel hasn’t had much luck with its broadband access partnerships since it decided to abandon the DSL market. Its relationship with ECI Telecom Ltd. (Nasdaq: ECIL – message board) ended in tears, while a partnership with Chinese vendor Huawei Technologies Co. Ltd. broke down before it even got going. (See Nortel, Huawei Kill JV, ECI: Nortel Didn’t Deliver, and Nortel CEO: We Blew It on DSL.)
The Globe and Mail has an article today looking at Nortel’s R&D operations/campus in Ottawa, which consist of 4,000 people and two Tim Horton’s coffee shops. The story is based on an interview with CTO John Roese (check out his blog), who talks about how Nortel’s need to better focused and more efficient when it comes to R&D, which means reducing costs. It’s unclear, however, whether cost-reductions involve things such as more efficient procurement, or whether it means the number of R&D employees around the world will be reduced.
Nortel CEO Mike Zafirovski has talked about Nortel maintaining its R&D spending at about 15% of total revenue but the company has also talked about the company being focused and not wasting money on skunk-work projects. And as much as everyone likes to talk about Nortel’s heritage as an innovator, the reality is Nortel is developing and selling new and different projects through joint ventures and partnerships with companies such as IBM, Microsoft and LG. This may mean internal R&D – while still important – can take on a different, more focused role on key technologies such as IP-TV and WiMax.
Here’s a concept that I’ve been trying to get my head around recently: what’s Nortel all about these days? Before anyone goes “huh?”, what I mean is what’s Nortel raison d’etre? When you think of Nortel, you think of what? For example, Ericsson is all about wireless communications; Cisco is about routers, switches and, increasingly, home networking equipment; Nokia and Motorola are about handsets. So what’s Nortel about these days? Is it VoIP? Is it IP-TV? Is it Wi-Max? Is it CDMA? Is it enterprise? Is Nortel still trying to be all things to all people?
I’m sure Nortel CEO Mike Zafirovski has a clear idea about how he wants to position the company within the telecom landscape but even after 18 months at the helm, Nortel still lacks identity. “We are Nortel, we’re good at xxxx!” I wonder if this is an issue for customers, particularly customers looking for to buy next-generation equipment such as Wi-Max or IP-TV? If anyone provide a definitive definition of the new Nortel, bring it on.
At the upcoming 3GSM conference, Nortel promises to “challenge the industry to deliver the 4G “Lifestyle” by rolling out next-generation, high-speed wireless technologies that can deliver services such as video and high-definition TV broadcasting. When did 4G become a lifestyle? How come no one told me? If it means getting a fast, user-friendly Web access while on the road, I’m all for that. Nortel plans to walk the walk in addition to talking the talking about the 4G Lifestyle (4GL?) at 3GSM by demonstrating the wireless industry “first live end-to-end MIMO-powered WiMAX solution, using advanced innovative antenna technology to deliver high-bandwidth applications, such as real-time video, over personal mobile devices”.
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Network World’s Jim Duffy, how covers the telecom beat as well as anyone, has an interesting story for anyone curious about Nortel’s comeback efforts. In an article called “Five things Nortel must do to complete comeback”, Duffy writes that Nortel’s customers, partners and analysts believe the company needs to:
– improve business relations with users and resellers
– rationalize its product line, which still appears to be “confusing and redundant”
– rationalize its lines of business to really become a rival to Cisco in the enterprise sector
– purchase or develop its way back into the IP core and edge router market
– work out a way to get bigger so it can compete with rivals such as Alcatel-Lucent
Nortel’s chief strategy officer George Riedl’s top five priorities are:
– Reduce costs or expand margin by $1.5 billion over the next several years;
– Transform the enterprise business;
– Drive next generation mobility around 4G wireless technologies;
– Build a professional services business;
– Retool the company’s brand awareness and go-to-market strategy
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After being unceremoniously shut out of BT’s $19-billion, next-generation network contract, Nortel has squeezed its way back into the game after BT has selected Nortel’s Metro Ethernet Routing Switch 8600 and Metro Ethernet Services Unit 1850 for the Ethernet component of its 21CN. (Siemens also got part of the Provider Transport Backbone business) “Today’s announcement marks a significant industry turning point,” said Mike Zafirovski, Nortel’s president and chief executive officer, who’s clearly relieved Nortel is back in the BT game. “BT is using Ethernet technology in a completely new way to provide an answer to the challenge of simplifying network management, redefining service quality and reducing costs.” For more details, check out LightReading.
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So let’s have some holiday fun and put together a 2007 wish list for Nortel CEO Mike Zafirovski. Let’s me start things off by suggesting Mike Z. could like to see the small and medium size business market really embrace the BCM 50 so it becomes a $1-billion a year business. Anyone else want to step up?
For an interview and comprehensive read on where Nortel is heading strategically, check out Business Line. The story includes a number of graphics that provide some good insight into where Nortel is headed and some of the key trends within the high-tech/telecom industry.
Nortel and Southeast European Communications and Investments Inc. plans to established a joint venture in southeast Europe to drive sales of its ethernet, optical, multi-media and wireless products to carriers in the region. Called Nortel SE, the JV will have 30 sales and marketing employees and open its first offices in Bulgaria, Serbia and Macedonia, which also happens to be Nortel CEO Mike Zafirovski’s native country.
If you’ve ever wanted to know more about Nortel’s IMS strategy, Rich Tehrani had a chat recently with Eric Bezille, Nortel’s IMS product marketing manager for Europe and Asia.
Forbes has a story looking at how the growing amount of Internet traffic (video, gaming, data, etc.) is forcing carriers to expand their networks, and provide some sweet business to equipment suppliers such as Nortel, Cisco and Alcatel. Infonetics projects that major carriers will spend $203.1-billion on capital expenditures this year, up 5% from last year – much of it focused on the “last mile” to serve the needs of residential and business users as opposed to long-haul networks. Infonetics expects sales of metro Ethernet equipment will triple from about $5-billion in 2005 to more than $15-billion in 2009. Nortel CTO John Roese, who’s enjoying his 15 minutes of fame, told Forbes that “It’s surprising to [carriers] that we’re starting to see bandwidth growth in a way that we maybe didn’t predict.”