Microsoft and Nortel Forge Alliance Communications Products Will Be Jointly Developed In Bid to Take On Cisco
By ROBERT A. GUTH Washington Post July 19, 2006; Page B6 http://online.wsj.com/article/SB115327446269310679.html?mod=technology_main_whats_news Microsoft Corp. and Canada's Nortel Networks Corp. reached a broad pact to jointly develop, market and sell communications products, in a direct salvo aimed at Cisco Systems Inc. Under the deal, Microsoft and Nortel agreed to form joint teams to develop hardware and software for businesses and telecommunications providers. No money will change hands but each company said it expects to make "significant investments" in the alliance. Officials declined to elaborate. The companies hope to exploit the rapid rise of Internet-based technology to combine email, voice mail, voice calling, conferencing and instant-messaging in a single system. Microsoft, Redmond, Wash., and Nortel, Brampton, Ontario, plan to cross-license each other's technology and invest in joint business-development efforts, executives at the two companies said. The pact reflects a long-term shift away from phones that have been managed by switching systems called private branch exchanges, or PBXs. Newer systems that use Web-based technology, as well as general-purpose servers based on Microsoft software and a chip-design pioneered by Intel Corp., can cost less and can be more flexible than proprietary PBX hardware, Microsoft and Nortel executives said. "We think of this as one of the truly large opportunities in front of us," said Microsoft Chief Executive Steve Ballmer. The deal helps give Microsoft access to Nortel's customer base and experience with communications technologies. Nortel, meanwhile, gets a strong partner in its struggle to stave off a rush of competitors expanding their own Internet offerings, including Avaya Inc., Siemens AG and Alcatel SA, which plans to merge with Lucent Technologies Inc. by year's end. Nortel, which relies on telecommunications carriers as its main source of revenue, for years has struggled to compete in the corporate market against Cisco, which has its roots in selling Internet gear to businesses. Microsoft has little experience in telecommunications, but the Nortel deal indicates the field's rising importance to the world's biggest software maker. "The battle now appears to be more and more Microsoft versus Cisco," said Irwin Lazar, a senior analyst at Burton Group. "All equipment makers are trying to figure out where they fit." Mr. Ballmer highlighted several areas that Microsoft cooperates with Cisco. But when it comes to the market for business communications, he said, Microsoft will be pushing Nortel equipment. With Cisco, "if there's an aspect of competition, so be it," Mr. Ballmer said. A Cisco spokeswoman said Microsoft and Cisco have a "strong track record of collaboration" and that the companies "continue to look for opportunities to build on these successful initiatives." The pact comes as Mike Zafirovski, named as Nortel's chief executive officer in November, tries to remake Nortel amid a downturn of the telecommunications-equipment industry and a sweeping accounting scandal that rocked Nortel in 2004. Nortel in June said it posted a first-quarter loss of $167 million, compared with a loss of $104 million for the same period a year earlier. Mr. Zafirovski estimates that the deal with Microsoft will yield Nortel $1 billion in revenue by the end of 2009. In 2005, Nortel reported total revenue of $10.5 billion. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
