Shasta La Vista

Changes ahead Nortel's IP services unit?

July 20, 2000

3 Min Read
Shasta La Vista

Two key executives have left Nortel Networks (NYSE/TSE: NT). And while sources speculate it could signal problems with the vendor's IP service subscriber platforms, the executives themselves say they're just moving on.

Nortel has confirmed the June 30 departure of Anthony Alles, former president of Nortel's IP Services business unit, who came to Nortel when the company he founded, Shasta Networks, was acquired by Nortel in April 1999. Also gone is Arthur Lin, who served as VP of engineering and manufacturing for the IP Services unit.

According to Alles, both men are taking a bit of time off before considering their next venture -- the start of another company together. He says they have helped establish Shasta within Nortel as agreed. And while Shasta has progressed to the point where its products can be taken to the next level of integration with Nortel's, he says he and Lin aren't really interested in the kind of work that involves. "We aren't big company people," he says. "That's why we left Cisco in the first place," he quips.

Succeeding Alles as head of the IP Services unit is Joe Hickey, formerly the director of business development for the unit, and the man who oversaw the acquisition of Shasta.

Nortel originally acquired Shasta to compete against Redback Networks (Nasdaq: RBAK) in the area of subscriber management. Shasta's Broadband Service Node hardware platform and software are designed to provision customized IP services for thousands of subscribers -- putting them in direct competition with Redback's Subscriber Management System.

But some sources say Shasta's products aren't cutting it. "The Shasta products can't scale," says Gina Sockolow, analyst at Brean Murray. She says that they failed to stand up in some carrier networks, and that unless they get an overhaul, adding MPLS and DWDM interfaces, they probably won't live up to expectations. She says the new IP Services team will likely shift its strategy to focus on virtual private networking (VPN) capabilities in its products, instead of emphasizing do-all IP subscriber management.

Nortel denies there are any scalability problems with its platform. Alles calls the allegation "ridiculous.... We've had significant revenue growth at Nortel. In fact, I know Nortel doesn't break out our revenue, but I wouldn't be surprised if it hadn't tripled this year."

As to a shift in strategy, Alles says that's misleading. Subscriber management, he maintains, is only a subset of what's needed for carriers to make money from next-generation networks. Beating the subscriber management drum alone is passe, and the industry shouldn't be surprised to see Nortel bring VPNs and other capabilities to the fore.

"It is true that we are emphasizing our VPN capabilities more, but that is because we don't see that pure IP subscriber management, such as Redback is providing, will be viable without added value," says Keerti Melkote, IP Services director of product management.

Melkote also happens to be a former Shasta employee, and he says that much of the Shasta engineering staff remains at Nortel. And as for adding MPLS and DWDM connectivity to the IP Service platform, that's on the drawing board, he says: MPLS will be added by year's end, and optical interfaces at an undisclosed future date.

-- by Mary Jander, senior editor, Light Reading

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