John Dix: Nortel seeks enterprise limelight

Malcolm Collins, the recently appointed president of Nortel’s Enterprise Networks group, admits customers have been asking questions about the company’s relevance and, indeed, its ability to survive. But when he stopped by my office last month he said those issues are largely behind the company now.

Although Nortel Networks Corp. finished 2002 with a loss of US$3.6 billion on revenue of US$10.6 billion, the heavy cutting the company did last year should pay dividends this year. Collins says Nortel expects to report a profit in the second quarter.

And in terms of relevance, Collins says the high-end voice over IP products announced last October and the complete refresh of the company’s local area network products will get customer and channel attention.

Asked if the latest convergence push is coming too late, Collins, an 11-year Nortel veteran, says every technology has a prime time. He argues that the other vendors were too early, hawking systems when customers didn’t yet have the proper QoS, power over Ethernet and management infrastructure in place.

“I think we’re hitting it just right,” he says.

The Enterprise group represents about 25 per cent of Nortel’s revenue, or roughly US$2.5 billion, and of that the Meridian PBX line represents the largest single chunk, about 40 per cent. Collins says Nortel will be able to parlay its leadership position in voice into a No. 1 position in convergence.

“The perception of the company today is we have a complete portfolio and the applications to go with it,” he says.

The LAN side represents more of a challenge, where, by Collins’ own account, he has only 10 per cent market share.

“Where we’re coming from, we have to have technically superior products.”

The biggest challenge, he says, is convincing value-added resellers (VARs) that there is an alternative to Cisco. He’ll do that by offering better margins and relying on a branch model the company just adopted. With this approach, some employees in regional offices are dedicated to working with VARs while others bang directly on the doors of potential customers.

The other big challenge, Collins says, is convincing enterprise customers that there is enough market competition to make it worthwhile to put jobs out for bid. “Why wouldn’t you put a Layer 2 or 3 job out to tender?” he asks. At the very least you’ll get a better price, he says, and you might be surprised at what you find.

Whether Collins can convince the world that Nortel Enterprise is back, we have to agree with him that having a strong competitor to Cisco can only help the market. And he’s right: it can’t hurt to seek multiple bids.

Dix is editor-in-chief for Network World (U.S.). He can be reached at