Nortel customers await results of restructuring plan

LAS VEGAS — Nortel enterprise customers have pressed “a pause button” in purchasing gear from the company, the chief of Nortel’s Enterprise Solutions group acknowledged this week.

Customers are waiting to see what Nortel will look like when its restructuring plan due July 30 is revealed, said Joel Hackney, president of Nortel Enterprise Solutions, at this week’s Interop conference. They are also waiting on their own budgets to open up so they can resume spending, he said.

“We’re seeing a pause button in a large portion of our customer base,” Hackney said. “It’s caused by the economy and Nortel’s position.”

Hackney says Nortel customers are not fleeing the company while it reorganizes under Chapter 11 bankruptcy protection. “The sales cycles are lengthening but the loss rate is not increasing,” he said.

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Nortel said it’s still in the enterprise switching game. This week it rolled out a core data center switch, the VSP 9000, as a proof point that it continues to develop product even though its future as a company hangs in the balance.

Hackney also said Microsoft has not abandoned the company and the Innovations Communications Alliance they shared for unified communications. Microsoft this week announced it has entered into a similar arrangement with HP, which the companies funded with $180 million over four years and cross-licensing of patents.

“The benefits to both companies (Nortel and Microsoft) have met our expectations,” Hackney said of the four-year ICA alliance, which ends next year. “The HP elements have some common elements between the Nortel/Microsoft alliance. But they also have some pretty specific differentiation.”

HP has IT infrastructure – PCs, servers, data center – while Nortel specializes in real-time communications, Hackney says.

“Microsoft feels they have enough capacity to have two or three key alliances like this,” he says. Indeed, Nortel is focusing its enterprise business on being a focused and unencumbered provider of enterprise infrastructure specifically for unified communications deployments.

“We can be a very relevant and profitable business without have to be a $10 billion business,” Hackney says, adding that Nortel is looking to now address these opportunities with the mentality of a start-up – albeit one with a significant installed base. He claims Nortel can be a “pure play” in the enterprise UC infrastructure space while rivals like Cisco are stretched across virtually every market; and HP and others are fixated on the data center.

Hackney says a portion of Nortel enterprise customer base will keep fingers on the pause button until Nortel files its official restructuring plan and they have a clear idea what becomes of the company’s enterprise business. But a larger portion will ease up on it as they detect evidence of product development progress, he says.

“They start to say, ‘Boy, Nortel is in business in a meaningful way. They’re delivering innovation that means values to us.’ As that continues to be demonstrated I think the pause button starts to get lightened.”

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Jim Love, Chief Content Officer, IT World Canada

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