Nortel updates rebound progress

Nortel this week announced strategic initiative to focus on driving market share in metro Ethernet networks supporting high-bandwidth video applications.

The initiative was disclosed during two separate conference calls with media and analysts to update Nortel's progress during the first six months of President and CEO Mike Zafirovski's tenure with the company.

Nortel's Metro Ethernet Networks initiative will target development of products designed to deliver high reliability and security for service provider metro Ethernet wireline and wireless deployments, specifically for video applications. Philippe Morin, formerly general manager of Nortel's Optical division, will head the Metro Ethernet Networks effort.

Morin grew Nortel's optical business 24% last year, to $1.2 billion, according to Zafirovski.

Metro Ethernet joins IPTV, IMS and WiMAX as a strategic focal point for Nortel's turnaround after restating years of financial results following an accounting scandal in 2004. Nortel is looking to gain at least 20% market share in product areas it deems "key," such as next generation mobility, enterprise infrastructure, and applications and services.

As part of that, Nortel is also decreasing its focus in other product areas, though Zafirovski declined to identify all of them during a conference call this week with the media. Nortel did exit or cancel activities in six product areas, which represented $73 million in R&D in 2005.

"We will not go public with every single product decision," Zafirovski said. "This is a normal course of business. In my 31 years in business, we have never provided that level of granularity."

Nortel also reduced its activity in three product areas, reducing R&D from $80 million in 2005 to $39 million in 2006. Nortel also sold or has for sale two product operations that accounted for $11 million in R&D in 2005, Zafirovski said. One of them was the company's blade server business.

The company is also increasing investment in three product areas -- IMS, IPTV and WiMAX -- by $100 million over last year and $67 million over 2006's budget; and has acquired a product line through its purchase of router maker Tasman Networks, where it will invest $11 million this year.