Business Tech

Damaged by lower sales, huge operating losses, and a falling market share, Nokia Siemens Networks is pinning its hopes on a major reorganization.

The network equipment maker, jointly owned by Nokia and Siemens, announced Tuesday that it will lay off 5,700 employees and cut its five business units to three as part of a plan to slash expenses by 500 million euros ($740 million) by the end of 2011.

The layoffs will represent around 7 percent to 9 percent of the company's 64,000 global employees and is likely to be felt across all countries in which Nokia Siemens has a presence. The company did not state which jobs would be affected but did say that any disruption to sales positions that deal directly with customers should be limited.

The three new revamped business units are expected to launch on January 1 and will include Business Solutions, Network Systems, and Global Services.

"As our customers make purchasing decisions, they want a partner who engages in issues well beyond a traditional discussion of technology," said Rajeev Suri, chief executive officer of Nokia Siemens Networks, in a statement. "Business models, innovation, growth and transformation are now very much front and center when it comes to the selection of a technology partner - and our planned new structure will position us well in this changing market."

The company said it's also looking at potential new acquisitions and partnerships that could enhance its product line or expand its customer base. In June, Nokia Siemens bought Nortel's wireless technology for $650 million.

"We recognize that we are operating in a market where customer needs are evolving fast," said Mika Vehvilainen, chief operating officer of Nokia Siemens Networks, in a statement. "We see acquisitions and expanded partnering as important tools to help meet these needs in the fastest, most efficient way possible."

Formed in early 2007, Nokia Siemens has seemed cursed from the start. Its launch was initially delayed a few months due to a bribery scandal involving several former Siemens executives.

The new company had hardly gotten off the ground when it announced it wouldn't meet financial expectations. And it's struggled since then, hurt by the economic downturn and increasing competition.

Third-quarter sales fell 21 percent to 2.8 billion euros, while its operating loss widened to 1.1 billion euros. Parent Nokia was recently forced to spend 908 million euros to write down the value of the deteriorating business.

Gartner analyst David Cearley

(Credit: Stephen Shankland/CNET)

ORLANDO, Fla.--Cloud computing isn't going to be vapor much longer, Gartner said Tuesday.

The general idea--shared computing services accessible over the Internet that can expand or contract on demand--topped Gartner's list of the 10 top technologies that information technology personnel need to plan for. It's complicated, poses security risks, and computing technology companies are latching onto the buzzword in droves, but the phenomenon should be taken seriously, said analyst Dave Cearley here at the Gartner Symposium.

Gartner's top trends to watch.

(Credit: Gartner)

Specifically, companies should figure out what cloud services might give them value, how to write applications that run on cloud services, and whether they should build their own private clouds that use Internet-style networking technology within a company's firewall.

Cloud computing takes several forms, from the nuts and bolts of Amazon Web Services to the more finished foundation of Google App Engine to the full-on application of Salesforce.com. Companies should figure out what if any of those approaches are most suited to their challenges, Gartner said.

Gartner analyst Carl Claunch

(Credit: Stephen Shankland/CNET)

The advice came as part of a talk on top trends coming in 2010 that companies should incorporate into their strategic planning, if not necessarily their own computer systems. The full list of 10: 1. cloud computing; 2. advanced analytics; 3. client computing; 4. IT for green; 5. reshaping the data center; 6. social computing; 7. security--activity monitoring; 8. flash memory; 9. virtualization for availability; and 10. mobile applications.

Second on the list is virtualization--not just in the broad sense of technology that lets a single computer run multiple operating systems simultaneously, where it's become a fixture in data centers, but as a means to keep computing services up and running despite computer failures, said analyst Carl Claunch.

Virtual machines can be moved from one physical machine to another today. Later, by keeping two machines tightly synchronized, a failure in a primary machine can be eased over rapidly by moving the active service to the backup machine, Claunch said.

"We should start seeing this roll out in the next year or two from vendors," he said.

The Gartner hype cycle takes on the PC.

(Credit: Gartner)

For PCs, virtualization is arriving, too.

"Think of applications in bubbles," Cearley said. "They can run on client devices or up on a server," with virtualization providing the encapsulation technology to move the work around. The official corporate computing environment can run side by side with employees' home computing environment.

That, along with cloud computing, enables more freedom for people using PCs.

"We're looking at a time when the specific operating system and device options matter a lot less," Cearley said. "You could use a home PC or a Macintosh with a managed corporate image running on that particular device...We see more companies providing a stipend (for) employee-owned PCs."

Make your data center modular.

(Credit: Screenshot by Stephen Shankland/CNET)

Another idea: modular data centers. You don't have set up your IT gear in storage containers, but do divide them into pods that each have their own computing, power, and cooling, Claunch said. That makes it easier to pay as you go, to adapt to new technologies, and to increase energy efficiency by partitioning hot hardware from cooler hardware.

Green IT is important--and changing in its nature. It's not just a matter of buying efficient computers, but also of using computers to increase the efficiency of other parts of the business, Cearley said. For example, analytics can improve the efficiency of transportation of goods.

Next comes applications for mobile devices. "That has great potential for creating different experience or stickiness for your customers," Cearley said.

And mobile x86 processors from Intel and AMD could make software development easier, too, he added.

Social networking will happen internally and externally.

(Credit: Gartner)

Social-networking applications, broadly defined, also should be on company radar screens. The technology can take the form of internal corporate social networks, interactions with customers, and use of public services such as Facebook and Twitter.

Companies need to get a handle on what's going on--and potentially business purposes such as understanding how the corporate brand is perceived.

"Social network analysis will be moving from a somewhat arcane discipline to a much more mainstream component of your social computing strategy," Cearley said.

ORLANDO, Fla.--OK, IT managers, it's time to loosen up.

That's how analysts advised Gartner Symposium attendees here Monday, arguing that corporate computing departments shouldn't block social networking and that security shouldn't completely lock down communications with the outside world. And even if information technology authorities want to shut down such activity, they can't.

Carol Rozwell, a Gartner vice president

(Credit: Stephen Shankland/CNET)

"Banning access to social media from the corporate network is futile," said Carol Rozwell, a Gartner vice president. "The world we live in is digitally enabled and socially connected."

The advice reflects the transformation of the information technology world as the Internet steadily pervades more and more corners of everybody's life. Although the Gartner event historically has concerned itself with matters such as justifying the expense of a new enterprise resource management computing system, the broadening show reflects the growing scope of work that IT managers face.

Overall, companies must acknowledge that not everything is under control of their own top-down administration, said Peter Sondergaard, senior vice president of research at Gartner.

"We're moving from control to greater autonomy," Sondergaard said. Managers also must find an appropriate place on the spectrums of in here vs. out there and owned vs. shared.

Nokia on Thursday reported a loss for its third quarter of 559 million euros ($832 million) compared with a profit of 1.09 billion euros in the same quarter of 2008.

The net loss for the period that ended September 30 was triggered by declining sales, which fell 20 percent to 9.18 billion euros from 12.2 billion euros the prior year's quarter. A write-down of the company's weak Nokia Siemens Networks unit also put a big drag on the bottom line.

Net sales for the third quarter came in at 9.8 billion euros, down 20 percent from 12.2 billion in the year-earlier quarter.

Following the news, shares of Nokia stock fell 6.6 percent to 9.62 euros.

Though Nokia's mobile phone sales managed to eke out some gains, overall revenues were hurt by a shortage of components for many of its products.

"The demand for mobile devices improved in many markets during Q3," Nokia CEO Olli-Pekka Kallasvuo said in a statement. "With the average selling price of our devices holding firm quarter-on-quarter, our higher device volumes translated into increased net sales in our Devices & Services business. Our volumes and net sales were, however, somewhat constrained by component shortages we encountered across the portfolio.

The company said that its share of the mobile device market for the quarter was 38 percent, the same as in the year-earlier period and in the second quarter of 2009.

Nokia Siemens Networks, the network equipment unit formed in 2007 and co-owned by Nokia and Siemens, has struggled to turn a solid profit from the get-go. In a write-down of this failing business, Nokia was forced to spend 908 million euros.

(Credit: Nokia)

"The challenging competitive factors and market conditions in the infrastructure and related services business necessitated non-cash impairment charges at Nokia Siemens Networks," said Kallasvuo.

Despite weakness in the mobile phone sector, Nokia is optimistic about its near-term outlook. The company now sees volume for its phones hitting 1.12 billion units for the year, down 7 percent from 2008, but better than Nokia's earlier estimate of a 10 percent decline.

Nokia expects the market for its mobile infrastructure and related services market to fall 5 percent for the year from 2008 levels, an improvement over earlier estimates of a 10 percent drop.

However, the future remains cloudy for Nokia Siemens Network, which is likely to see its market share drop even further for 2009 than previously forecast, said the company.

During the third quarter, Nokia also completed its acquisition of GPS map specialist Navteq.

In the battle for supremacy among the software industry's Big Four, Cisco may be placing the biggest bets and angling for the biggest returns. Some still think of Cisco as a networking hardware vendor, but hardware is simply Cisco's beachhead into others' turf, similar to how Microsoft (desktop), Oracle (database), and IBM (everything) are using core strengths to move into adjacent markets.

If anyone needed further confirmation of Cisco's software aspirations, its forays into Linux offer a strong hint.

In what might have looked like a publicity stunt around a $100,000 prize for Linux developers, Cisco's Linux development contest was actually a major clue as to just how serious it is about becoming a leading server vendor with a global development community--and soon.

Today, Cisco announced the winners of its "Think Inside the Box" contest. The three winning applications are very interesting, but the bigger story here is what Cisco's contest just demonstrated:

Most of Cisco's 7 million installed Integrated Services Routers (ISRs) are now servers, for all intents and purposes.

The contest proved that server-side Linux developers who know C/C++, Java, or Python can now write applications to Cisco routers with little or no knowledge of routers. (Remember: the finalists only had 90 days to write their applications).

That's a development community of millions, folks. Overnight.

Still think Cisco is a hardware company? By fostering a developer ecosystem around its core router family of products, Cisco just made its hardware solutions much more valuable to its customers (and increased the stickiness of its customer relationships), and turned its routers into a big target development platform for developers.

I wrote about Cisco's contest last June as Cisco's way of paying developers to stick a finger in the Microsoft eye with a $100,000 bounty for writing Linux-based applications for its AXP (Application Extension Platform).

I clearly underestimated Cisco's ambitions.

This is doubly clear when correlated with another Cisco announcement this week about its new and expanded Cisco Developer Network, which SearchNetworking covered.

Cisco is serious about software and fostering a global developer community. As I argued in my "Software's Big Four" blog, each of these companies is entering new markets from incumbent positions of strength, unlike HP and SAP (which both have big software businesses), which are largely sticking to existing businesses.

Millions of Cisco routers already sit in data centers and branch offices around the world. They consume less power than servers. They have a smaller footprint. They're more secure. And they enable a class of applications that Cisco calls "network-aware." Just slot in an AXP blade hosting an application.

Basically routers are much smarter now, and with the right applications can be used to take control of your phones at night to monitor for burglars; manage HVAC, water, and power in your office; deliver advertising in your retail store; and much, much more.

There are two things Cisco still lacks, however, in order to make an unimpeachable bid for developers. First, it needs to move off Broadcom chips for its ISRs and add x86 chips to the mix, something that I'm hearing rumblings may well be on the way.

Second, as impressive as Cisco's outreach to Linux developers has been, the company also needs to support Microsoft's .Net/Windows developers. It's too big a market to ignore.

If Cisco can deliver on x86 and to Microsoft developers--and I think it just might--Cisco will have opened its router (server) family to an even larger development community than the already large Linux market, further blurring the distinction between routers and general-purpose servers.

The result? A formidable software company that sprouted out of a dominant hardware company. How would Oracle, Microsoft, and IBM react?

Follow me on Twitter @mjasay.

Juniper Networks has announced the industry's first 100Gbps Ethernet router interface card.

The networking company unveiled the 100Gbps Ethernet interface on Monday. The card will be sold as part of Juniper's T1600 core router, which is a high-performance product aimed mostly at telecommunications providers, but also usable by cloud-infrastructure companies and others rolling out large-scale virtualization.

"[100Gbps Ethernet] has always been inevitable, it has just been a question of when--now trends such as cloud computing, data center consolidation and virtualization are making the need for [100Gbps Ethernet] more acute and urgent than ever before," Opher Kahane, Juniper's general manager of high-end systems, said in a statement.

The 100Gbps Ethernet standard has not been published yet. Right now, it is being incubated, alongside 40Gbps Ethernet, by the IEEE's P802.3ba Ethernet task force, with final publication not expected for a year, at least. The fastest currently published Ethernet standard is 10Gbps.

Juniper's 100Gbps Ethernet interface card is "expected to be deployed in customer pilot networks before the end of 2009", the company said, but did not say why the product was being released before the standard is finalised.

David Meyer of ZDNet UK reported from London.

IBM is adding a new chapter to the high-tech industry's long history of "coopetition."

Big Blue is expected to announce on Tuesday that it plans to resell Ethernet switching equipment from Brocade, a much smaller rival to Cisco Systems. Under the agreement, IBM will rebrand and sell Brocade's enterprise IP networking equipment as its own through IBM's global sales force and authorized IBM Business Partners.

IBM's move is interesting for two reasons. One, it clearly pits IBM against one of its biggest partners, Cisco. And two, it puts IBM back in a market it exited 10 years ago. In a somewhat ironic twist, IBM will now be competing against the company it sold its networking business to in 1999. Cisco paid $2 billion for all of IBMs networking patents, products and customers. As part of the agreement, the two companies formed a strategic alliance that allowed IBM Global Services to resell Cisco's products.

No one knows for sure how much business Cisco has gotten from the deal. But IBM is the world's largest systems integrator, and analysts say that Cisco could get about $400 million to $500 million from IBM's sales each year.

When IBM sold its networking business to Cisco, it said it did so because the investment that was necessary to compete effectively in the changing networking market was too high. But now it looks like IBM sees opportunity in networking, or perhaps the company is feeling threatened as it sees its close partner edge into its market.

For years, Cisco has been expanding into adjacent businesses, which sometimes overlap with markets its partners are already in. For example, Cisco competes directly with Microsoft in unified communications.

But Cisco's most recent move to build and sell its own data center servers along with an entire solution for the data center that includes networking equipment has likely stirred the coopetition pot even further for partners, IBM and Hewlett-Packard, which also sell products designed for the data center.

"The relationship between Cisco and its partners IBM and HP has changed significantly," said Zeus Kerravala, a senior vice president at the analyst firm Yankee Group."Now when you hear Cisco talking about their big partners they are talking about Oracle and SAP, but not so much about IBM, HP and Microsoft."

Cisco's strategy in the data center, which it unveiled about a month ago, is to provide a total solution from soup to nuts that includes high-performance networking equipment as well as servers and virtual server solutions. Kerravala said that Cisco's new strategy has likely set a fire under its close partners to come up with a total solution of their own.

"I don't think the Brocade/IBM deal is a total reaction to Cisco's Unified Computing strategy," he said. "But I'm sure it contributed to it."

Brocade's CEO Michael Klayko admitted Cisco's aggressive moves in the data center market have opened some doors for the company from customers and other technology partners looking for options other than Cisco.

But he said the deal with IBM had been in the works long before Cisco announced the Unified Computing strategy.

"We started talking with IBM well over a year ago about this," Klayko said. "So I think part of IBM's willingness to work with us was part offensive. This is a $20 billion to $30 billion market we are talking about here. As for the timing of everything, we can't control when our competitors are going to bring new ideas to the market, but I can say that it has facilitated some good things for us."

IBM's choice of Brocade as a partner shouldn't come as much of a surprise either. The companies already have a similar agreement in which IBM rebrands and resells Brocade's storage area networking equipment. While rebranding and reselling products in the storage market is common place, it isn't in the networking market. And until now, Cisco has largely gone unchallenged in its core business.

For most of the past decade, Cisco has primarily competed against much smaller rivals in the networking and switching business. While these smaller competitors have been able to win some business, none have made a big dent in Cisco's market share. Even large competitors, such as Nortel Networks, have failed at taking on Cisco, which currently wields 90 percent market share in networking equipment.

But over the past few years, another partner-turned-competitor has also challenged Cisco's dominance. And for the past four or five years, HP has been building up its Ethernet switching business. And now the company's ProCurve products account for 10 percent of the Ethernet switching market and the company is No. 2 in terms of market share, Kerravala said.

He explained that the deal with Brocade finally brings a formidable competitor to Cisco in the high-end switching market. HP's ProCurve products can address the low-end of the market. And IBM will address the high end of the market with products Brocade bought from a longtime Cisco competitor Foundry Networks.

Even though companies, such as Foundry have been competing with Cisco for more than 10 years, they have lacked the sales force and marketing power to provide a real threat to the company.

But Cisco's new competitors, who also happen to be partners, could take a significant chunk of Cisco's business.

"Fighting against HP, Microsoft, and IBM is totally different from competing against small startups and smaller companies that have been around forever," Kerravala said. "The bigger companies can spend just as much as Cisco can on marketing and they also have the sales force to outrun Cisco."

SAN FRANCISCO--Although it's been hard for companies to financially justify the expense of embracing the next-generation standard for wiring together the Internet, the incentives are now arriving--and Google itself stands to benefit from the resulting democratization of networking.

Google thinks the time is ripe to begin adopting Internet Protocol version 6. The search giant, which handles gargantuan amounts of traffic, has gradually been making more of its Web properties available over IPv6, which despite being defined for more than a decade still is rare compared to the current IPv4.

The company has been gradually making its properties available over the new standard, starting with an IPv6 access to its search engine in March 2008. The range of other Google properties similarly available expanded to include Google Maps last week, said Lorenzo Colitti, a Google network engineer who spoke Wednesday at a Internet Society panel discussion at an Internet Engineering Task Force meeting here.

Lorenzo Colitti, a Google IPv6 network engineer

(Credit: Stephen Shankland/CNET)

The big advantage IPv6 has over IPv4 is the number of unique addresses it can accommodate--4.3 billion for IPv4 compared to about 34,000,000,000,000,000,000,000,000,000,000,000 for IPv6. Although 4.3 billion may sound like a lot, addresses are often allocated in large blocks that mean many aren't generally available, and expert estimates forecast an end to new IPv4 addresses in 2011.

Correction: An earlier version of this story misstated Cisco's yearly earnings.

If you haven't noticed, Cisco Systems, whose products have been used to build the Internet for 20 years, has spent the past 6 years becoming a big player in the consumer electronics market.

While Cisco still generates the bulk of its nearly $40 billion in yearly revenue from selling routers and switches to large companies and Internet service providers, the company has also been pushing into new markets, such as consumer electronics, over the past several years.

Still, most consumers probably have no idea who Cisco is or what it does. Sure, they may have seen those cute "human network" commercials on TV. But other than that, I'd guess the average Joe has no clue what Cisco does.

Some might be familiar with the Linksys brand, which has traditionally sold home networking gear. But Cisco executives say they are on a mission to make Cisco a household name. Not only is the company making a bigger effort to brand its products as Cisco, but it's also busy developing a slew of new products for the consumer market.

And on Thursday the company announced its most aggressive play in the consumer market to date with the $590 million acquisition of Pure Digital Technologies, the maker of the popular Flip Video mini camcorders.

But Pure is by no means the only major acquisition Cisco has made in the consumer market. In fact, the company so far has pretty much built this part of its business through acquisitions. In 2003, it got its start in the competitive CE market with the $500 million acquisition of the home-networking equipment maker Linksys. Then in 2005, it bought Scientific Atlanta, a quasi-consumer electronics company, for $7 billion. Scientific Atlanta makes set-top boxes that Cisco sells to subscription TV providers.