Newsmaker: Nortel Networks gets back on track

Canadian telecommunications equipment maker Nortel Networks has had a tough couple of years, but its new executives say they've cleaned house and are ready to get back to business.

For more than two years, Nortel was almost paralyzed by an accounting scandal that forced the departure of several top executives, including its CEO. It also prompted probes by U.S. and Canadian regulators as well as criminal investigations. With the scandal behind them, executives at the company say they're focused on developing next-generation technologies and new markets.

John Roese, Nortel's chief technology officer since June, sat down with CNET News.com to talk about how the company is positioning itself, post-scandal.

Q: What has changed at Nortel over the last several months?
Roese: Well, the most obvious thing is that the black cloud of scandal has been lifted. Nortel is a great company with great potential, but it was misdirected for the past five years.

When Mike Zafirovski came in, he assembled a new team of executives. And immediately, we set about putting a stake in the ground in markets where we knew we could be successful. We decided we wanted to focus on the next generation of wireless--4G. So we started by divesting the UMTS (Universal Mobile Telecommunications Service) business. We only had a 5 percent market share in that market, and there were 15 competitors. So it wasn't a great business for us to be in. Getting rid of the businesses that weren't making us much money freed us to go after other markets, like 4G wireless, more aggressively.

But 4G wireless hasn't even been defined by the International Telecommunications Union. How can Nortel say that it's going to be a leader in 4G wireless?
Roese: You're right--the ITU hasn't codified 4G yet. But any carrier will tell you that 4G wireless will be based on OFDM (orthogonal frequency division multiplexing) and MIMO (multiple input, multiple output) technology. It will be more data-centric than 3G wireless. It will be based on IP (Internet Protocol) rather than TDM (Time Division Multiplexing). Nortel has been an innovator for the past seven years in developing wireless technologies that are based on these underlying technologies.

We're at an inflection point in the industry, and we have an opportunity to participate in a new networking market.

There's been so much talk about WiMax being the next generation of wireless technology. Do you think it's overhyped?
Roese: WiMax is coming, but it's not something people can buy today. Sprint's announcement that it will be deploying WiMax has moved things along. They've said 100 million people will have access to their WiMax network by the end of next year. And Intel has said it will put WiMax in Centrino chips. They did the same thing when they seeded the Wi-Fi market, and look what happened.

Sprint is already a Nortel customer. Why wasn't the company involved in its 4G wireless announcement? Sprint announced Motorola and Samsung as partners.
Roese: It was absolutely a missed opportunity. Traditionally, Nortel hasn't been a very good marketing company. We really are ahead of the market in terms of productizable WiMax products, but no one knows it. We treat a lot of technological innovation as science projects rather than thinking of ways to market them. As soon as I realized what we had in WiMax, it was too late to be involved with Sprint's announcement.

Sprint's philosophy has always been to use multiple vendors. They've named a few already, ones with big marketing dollars. But when the network is deployed, they'll be using other vendors.

In what other markets does Nortel see opportunity?
Roese: We see that the enterprise market is out of balance. There is a paradigm shift going on, and we see this as a big opportunity.

But hasn't Cisco Systems pretty much won the enterprise networking market?
Roese: No, I don't think they have. If the enterprise market stayed the same, then maybe I'd say Cisco has won. But the market is actually starting another cycle.

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[katamari]

In this case, actions speak louder than words.

I'll believe it when I see it. Roese, I'm not giving you the benefit of the doubt because it's hard to believe that a large company of any size can truly be moral.

Remember something, folks: these present-day financial shake-ups within upper management are the result of, in some cases, 10-15 years of financial scandals. That is, it took 10-15 years before something was actually done about them.

So even if Roese is telling the truth, we probably won't know until 10 years from now. By then, he may have left the company and sold all of his stock... see where I'm going with this?

It's just something to keep in mind before turning a blind eye to past history.

[aabcdefghij987654321]

Gotta agree - rather see/read results

Roese sounds more like VP of Marketing than CTO. Sure it's good to be rah-rah about your company, but I would rather analyze more substantial answers (and a more in-depth interview) than buzzwords obviously used to paint a potentially overly-optimistic picture of a troubled company.

Let's come back to them in 3-6 months, to see what shakeouts of the shakeup.