Nortel revitalizes enterprise strategy

While many have viewed Nortel's business networks group as being largely dormant during the past few quarters, a recent reorganization and a new IP product push might indicate signs of renewed enterprise life.

Nortel recently introduced a new lineup of IP voice hardware and software that, observers say, puts it back on the same playing field with convergence competitors Cisco, Avaya, Siemens and Alcatel. New BayStack switching products from the company's long-quiet data network division also have encouraged some Nortel followers. But lots of uncertainty remains.

Financially, Nortel is not out of the woods yet. While the company trimmed its losses by almost 50% in the third quarter (ended Sept. 2) from the same quarter a year ago, it was still $1.8 billion in the red. Meanwhile, the company's stock still hovered around the $1 mark as of last week.

A year ago, Nortel reorganized into three divisions: long-haul optical, wireless and metropolitan-area networks. It later added the term "enterprise" to its metropolitan division to assuage enterprise customers worried about a lack of focus on their needs.

Last month, Nortel shook up its organization for the second time in 12 months, creating four divisions - wireline, wireless, enterprise and optical. Now Nortel has broken enterprise out as its own stand-alone division, along with its new wireline, optical and wireless network groups.

Nortel's flip-flopping between enterprise and carrier plans, coupled with poor overall financial results, has spooked a lot of CIOs, some observers say.

"They're going through some financial difficulties, and they have publicly said they are an optical company, which leaves enterprise customers wondering," says Sam Wilson, a network industry analyst and vice president with Merrill Lynch. "There are a lot of questions in CIOs' minds as to whether Nortel is committed to the enterprise space or not. That's one perception issue Nortel needs to address."

While Nortel and most other data network vendors play second fiddle to Cisco in corporate networks, Nortel also has lagged in the converged PBX arena, a market the company should be winning with its background in telephony, analysts say.

"To a lot of large enterprises, Cisco is like a warm blankie - they've got $200 billion in cash, and they're totally committed to the [enterprise] customer," Wilson adds.

As far as being a product-for-product alternative to Cisco in both the IP telephony and enterprise infrastructure markets, Nortel is still the only game in town, according to Mark Fabbi, a vice president at Gartner.

"The main battle for enterprise networking is being waged between Cisco and Nortel," Fabbi said last month in a session at the Gartner Group Symposium ITXpo. He noted that Nortel is one of the few companies that can match Cisco in terms of offering comparable products in the major enterprise network categories such as Gigabit Ethernet, wireless, WAN/VPN routing, Layer 4 to 7 switching andIP telephony.

"The rumors of Nortel's abandoning the enterprise market are largely the propaganda of other vendors," Fabbi added. "And, in fact, we are seeing a renewed commitment from Nortel to this market."