The Canadian networking company’s chief exec was in London yesterday for press, analyst and customer meetings designed to transmit the message that it is back on track, leaner and meaner. Also, that Nortel has the necessary focus to become the heavy hitter it once was in the sector, prior to massive write-downs, SEC investigations and financial restatements, not to mention the revolving door that was the CEO job before he arrived nine months ago.
That said, Zafirovski acknowledged that it is still very much a work in progress. It will take three to five years of transformation to recreate a great company, he said.
UTRAN sale
The visit came just days after the announcement that Toronto-based Nortel had reached a memorandum of understanding to sell its UTRAN radio access network business for UMTS, the 3G flavour for the GSM world, to French competitor Alcatel SA. It might have chosen to wait longer to make the announcement had an analyst from French investment bank Oddo Securities not blabbed to the press a month or so back, forcing the two companies’ hand. Negotiations are still expected to run to the end of this year before the deal is finalized.
Having made the announcement last Friday, Zafirovski is now quite open about the reasons for doing that deal, however. We had just 5%-6% of the UMTS access market, and without a reasonable chance of payback, he said.
Nortel execs are also quite transparent about the objectives he has set for the company’s businesses, namely to be number one or two in any sector we’re in, or have 20% market share. The UTRAN business clearly met none of those criteria and had little or no chance of achieving them in the foreseeable future.
While the sale left Nortel with its 2G access business in GSM, its UMTS network core offering and the entire CDMA network portfolio, Zafirovski and his newly appointed officers, CTO John Roese and chief strategy officer George Riedel, emphasized that, in terms of R&D and marketing spend, the company is focusing on 4G technologies from here on in.
WiMAX, Rev C and LTE
The rationale is that its expertise in both Orthogonal Frequency Division Multiplexing (OFDM) transmission and Multiple Input, Multiple Output (MIMO) antenna technology positions Nortel to be a key player in providing infrastructure for three different flavours of 4G. All three of them will use OFDM, while MIMO will enable them to work more efficiently. The three flavours are WiMAX, Rev C of cdma2000 and so-called Long-Term Evolution (LTE) for UMTS.
Shipments of WiMAX will start in early 2007, with carrier commitments thereafter, said Riedel. We’ll have Rev C in trial mode in later 2007, while LTE will be further out, ranging from 2009 to 2011, depending on who you talk to.
The means Nortel will be talking more, in the short term, to the likes of Sprint and Clearwire in WiMAX, and Verizon and Sprint in CDMA, than it will to GSM operators — many of whom are just now rolling out the 3.5G version of their networks (i.e. HSDPA), at least in the developed world. In the developing one, it hopes to see operators leapfrog 3G altogether and go straight to 4G, an idea that is not entirely fanciful.
Zafirovski outlined this strategy as part of a broader description of the three focus areas for the group: firstly, mobility and convergence; secondly, enterprise transformation; and, thirdly, services and solutions. With 4G and its PBT edge technology for Carrier Ethernet comprising the foundation of the first, the second is fundamentally about VoIP and voice and data convergence for businesses, with its alliance with Microsoft around unified communications the cornerstone here. The third is its expanding services portfolio and ambitions.
Microsoft alliance
The alliance with Microsoft was a very gutsy thing for Nortel to do, because some of the other PBX vendors like Avaya see Microsoft as too much of a potential competitor down the road, said Jerry Caron, VP of research at analyst firm Current Analysis.
Indeed, there are suggestions in the market that Microsoft may have even gone to Avaya first and been rejected, though neither side will comment on these rumors. In becoming Microsoft’s PBX vendor of choice, Nortel can also position itself more clearly as the anti-Cisco in the IP telephony world.
If the ISV’s real-time collaboration platform, formerly Live Communications Server and now Office Communications Server, is destined to become the corporate PBX in a few years from now, Nortel will be looking to provide not only its PSTN break-out, that is, the connection to non-IP phones worldwide, but also value added services such as call center integration.
Network-aware apps
Beyond the unified comms collaboration, however, the alliance with Microsoft also opens the door to a broader area, namely application-aware networking or, since that phrase is commonly used by Cisco, network-aware applications.
In other words, imbuing the apps running on a network with the ability to understand and adjust, as well as to adjust to, the physical network running underneath them. Roese cited as an example of an app that is network-unaware Google Maps for Mobile, in that it knows nothing of presence, location, proximity or identity, and you can’t derive location from an environment that’s unaware of the network.
Beyond Cisco’s preaching of app-awareness for its networks, this kind of rhetoric was also in evidence in June when JPMorgan Chase & Co announced the formation of the Advanced Message Queuing Protocol (AMQP) working group. The group’s other members included Cisco, Red Hat and Iona, and they had a mandate to drive an open standard for transaction messaging such that any server should be able to talk to any client in a middleware context, with the underlying network being aware of what’s going on above it and responding accordingly.
