September 20, 2007 1:39 PM PDT

Nortel seeks revival through 'hyperconnectivity'

"Anything that can be connected will be connected."

That's the essence of "hyperconnectivity," a term Nortel Networks has been trumpeting since the spring and that looms large over most developments at the communications equipment giant.

Since becoming chief executive of the company in November of 2005, Mike Zafirovski has been concentrating on a revival at the Canadian vendor, after years in which it experienced a slump in sales, large-scale layoffs and several episodes of restating financial results.

The revival of Nortel is taking place based on still-strong spending on research and development; a well-documented partnership with Microsoft for unified communications; and some notable contract wins, such as at the Department for Work and Pensions in the U.K. (through another big partner, BT) and Royal Dutch Shell, the first major unified-communications customer of note.

Mike Zafirovski Mike Zafirovski

But the trend it calls hyperconnectivity--Zafirovski and associates actually refer to it as a "megatrend"--gives more reason for optimism at a company that, by the admission of its own executive team, was only a few years ago able to offer "me too" products.

Zafirovski cites research from an academic at the Massachusetts Institute of Technology that forecasts more than a trillion nodes connected online over the next 15 years. "There is an opportunity for true mobile broadband," he said. "And there is a chance to completely redefine applications."

And that, the company reckons, means more opportunity. "Hundreds of doors are being opened that weren't before," Zafirovski added.

There are question marks over how bullish any communications vendor should be, given the horizon for such change and the short-term outlook of financial markets, and there are those who even point to the term "hyperconnectivity" as nothing novel.

But Zafirovski said, "Nortel is not driving this. This is going to happen."

In 2006, Nortel spent the equivalent of 18 percent of its revenues on R&D--a figure the company says was at the top end of communications equipment makers and should be slightly lower, at about 15 percent. It also spent too much of its time on legacy products and not enough on new products--a "recipe for disaster," in Zafirovski's words.

But the chief executive--still not even halfway into his three- to five-year plan to get the company at the front of the industry again--is confident. "This is a company coming back, leapfrogging competition, driving real innovation for customers," he said.

Two of the biggest competitors keen not to let Nortel make much headway are networking giant Cisco Systems and rapidly rising Chinese company Huawei Technologies.

Asked about Cisco's reputation as the undisputed leader in the sector and Huawei's rapid rise, with its traditionally low prices, Zafirovski said he welcomes the fight and would always sell on "quality, reliability and price."

Tony Hallett of Silicon.com reported from London.

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Nortel Networks Corp., communications equipment company, R&D, CEO, Cisco Systems Inc.

2 comments

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Is this artical a joke?
Their revenues have fallen from $30 billion to $10 billion.

How does Nortel plan to capitalize on this marketing moniker "Hyperconnectivity"? With their industry leading routing and switching?

"well-documented partnership with Microsoft". Microsoft will use Nortel until they no longer need them. Then they'll discard Nortel like refuse.

Compete with Cisco and Huawei? They?ve been really successful at that over the past 8 years. Their market share in switching and routing has shrunk to less than 2% in L2 & L3 solutions. Only HP has been able to make measurable market share gains over Cisco and Huawei. Nortel is a no show.

Nortel?s only hope is in wireless. They?re not going to rise to $30 billion in sales selling their CDMA gear. Basically ? they?re a bust.
Posted by srb8220 (13 comments )
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Not a Joke
Nortel has definitely had a tough time, but so have all of the incumbent equipment manufacturers. Nortel has solid products that necessary to migrate legacy PSTN equipment to IP. Further, they have a roadmap that includes mobile WiMax.

The landscape as we know it is changing and I think Nortel is too. I've had the opportunity to attend a few meetings where Nortel is speaking and it is apparent that they are looking forward. It's the forward-looking thinking that is necessary to succeed in this market. To their benefit, they have the products carriers need today and are preparing for what is coming next.

Hyperconnectivity does seem like a strange word, but it is happening. There are currently several projects underway that will enable a multiplicity of devices to communicate with other devices. For example, the ITU-T just started a brand new effort to create a new multimedia system called the Advanced Multimedia System (AMS) that will enable a user, for example, to make a call on a mobile phone call and right-click on a file on the desktop and send that file to the remote user without having to associate the user and the call. AMS will enable one to use a desk phone with a video display screen on the wall to display streaming video or application sharing. It is only being conceptualized, but you might find the project description interesting to read: <a class="jive-link-external" href="http://www.packetizer.com/voip/ams/papers/ams_project_description.pdf" target="_newWindow">http://www.packetizer.com/voip/ams/papers/ams_project_description.pdf</a>

Nortel was one of the companies that lent its support for the start of this work, which seems to fit well with what is described here. Perhaps the complication for Nortel is that others are also interested in achieving the same end-goal, so there will be competition for them.
Posted by paulej (1261 comments )
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