Nortel head: IP convergence way for Nortel to lead

Brampton, Ontario-based Nortel Networks Corp. named Malcolm Collins as its president of the enterprise networks division in December, two months after launching a renewed effort to win enterprise customers for networking products. That new direction came after layoffs and revenue declines for Nortel amid a declining market for companies that sell network gear to telecommunications and data service providers. Collins recently headed all major European accounts. He is now based in Raleigh, N.C., and reports directly to Nortel’s CEO. He spoke this week with Computerworld‘s (US) Matt Hamblen.

What happened with the new emphasis on the enterprise customer? In October, we brought the enterprise businesses back inside Nortel. We had been more aligned in terms of voice and data and metro enterprise networks, as opposed to being focused on the enterprise sector. There had been an outside perception that we weren’t as focused on the enterprise. Everybody now sees that renewed enterprise focus. Eighteen months ago, it was a tough time, as companies focused on wireless, enterprise and service providers. The marketplace has rewarded us somewhat since we went from the lows of the mid-40 cents per share in December to US$2.20 per share now, so we’re up 400 per cent in share price. It’s not a question of survivability anymore but when do we get back to profitability.

When is Nortel going to be profitable again? The second quarter this year, within three or four months.

What have you done to show customers you are focusing on them? We have the most complete voice-over-IP portfolio and can enable legacy systems for voice over IP, but can go completely greenfield as well. The Branch Communications Manager is really an office in a box. We see the real benefit in engaged applications across an enterprise – and “engaged” means we try to anticipate more what the customer is looking for and requires, instead of just reacting.

We’ve also had a number of product announcements in the last six months, including Power Over Ethernet devices. What we’ve done in R&D for enterprise is invest in the right places for enterprise, and you’ll see a lot of new announcements every quarter this year in data and voice. I have my own R&D budget, and we still invest very heavily in R&D.

In terms of marketing, we have re-engaged with major customers and media and analysts in recent months. We have some of the biggest user groups in the world. There was a period when we were a little quiet, then we were reactive and defensive last year and are on the offensive now. We’ve had positive reactions – for one, because people wanted Nortel to get through that period, and two, people want choice and haven’t had the choice. In terms of a Tier 1 vendor, there’s only really been the one name (Cisco Systems Inc.) on people’s minds, and I think everybody, including the CIO and LAN manager, wants to feel comfortable that there’s an alternative vendor. Up until now, I think the industry has allowed that one particular company to get away with it. As a result, some people are making very, very high margins on products that shouldn’t be making that kind of margin. There’s a major opportunity for us to come back in and be an alternative to the enterprise on a global basis.

Will you always beat Cisco on price? I don’t think we have to. Generally, we’re very competitive against them.

How is the enterprise initiative doing? We are 25 per cent of Nortel’s revenues, and the other divisions are wireless, which is first, and wireline-service provider and optical.

What would you say are Nortel’s weaknesses now? The biggest issue for us is helping our channel, our resellers. We directly touch customers but fulfil orders through the reseller. We now have reinstituted a branch model, where the customers see more of Nortel, and that’s in support of our channel. Pricing is still a matter between customers and the reseller.

How is the war in Iraq going to affect Nortel? The last month or so, enterprises in general have been anticipating something and hanging back a bit. When war happens, it will get people back to work again. But customers haven’t said, ‘We won’t buy just yet because of the war.’ The hesitance is that the anticipation for the war has been holding back the economy.

When there is a reconstruction effort, will Nortel want a piece of that? I don’t think we’ve gone that far in our planning. But as part of our enterprise effort, the U.S. federal division reports to me as well, and we are bolstering our efforts in the federal marketplace, with more salespeople and support and relationships with systems integrators. It’s part of our Canadian heritage, but we’re much more concerned with the outcome of the war than whether there’s a profit for us at this stage.

What technologies will Nortel lead the field with in the future? Convergence on IP networks is where we believe we will be the leader, converging voice and data. The new world will be a converged world. We are No. 1 in voice systems sold worldwide, and as we move into the converged world, we see that installed base as a massive advantage to us. Being No. 1 in convergence will drive us to being the only alternative in enterprise data. You need quality of service and Power Over Ethernet and many other things to run a truly converged network.