Nortel 'Rightsizes' Terabit Router
Nortel Networks Corp. (NYSE/Toronto: NT) officials today confirmed that the company has laid off approximately 200 people in its Optera Packet Core router division in response to the slowdown in demand for telecom equipment gear.
The layoff effectively cuts the Optera Packet Core’s development staff in half, as there had been approximately 400 employees working on the project, according to Nortel officials.
”We’re rightsizing the development initiative because there is not sufficient demand for a multiterabit switch/router in the current market downturn,” said Andy Lark, vice president of communications for Nortel. “Right now we’re relying on our Passport 15000 and the capabilities in the Juniper initiative.”
The Optera Packet Core was a next-generation terabit router for the core of telecommunications networks, designed to meld IP routing technology with core optical networks, based on MPLS (multiprotocol label switching). The product still hasn’t shipped, even though it was scheduled to by June of this year.
The announcement is another sign that Nortel hasn't made much progress in core routing -- and may be looking to cut its losses. In that market, the company has been reliant on a reseller agreement with Juniper Networks Inc. (Nasdaq: JNPR) and has struggled to develop and sell its own products (see Juniper-Nortel "Alliance" Gives Pause and Nortel Discloses Terabit Router Plans ).
Nortel's relationship with Juniper is difficult to quantify, but some analysts said that it may not be one of the most significant deals for Juniper.
The core router market is dominated by Juniper and Cisco, which together hold about 99 percent market share, according to The Dell'Oro Group (see Report: Juniper Still Gaining On Cisco). And sales for those leaders have slumped in recent months, with carriers scaling back massively on spending efforts in the core of the network (see Core Slowdown Hits Juniper).
Although the cutbacks cast more doubt on a program that has struggled over time, the move isn’t likely to have a material effect on Nortel’s business: Because the product never shipped, it didn’t produce revenue for the company. A Nortel spokesperson said the cutbacks came in response to a slowdown in demand for core switching and routing products.
In midday trading, Nortel shares were down 0.51 (5.66%) to 8.50.
— R. Scott Raynovich, Executive Editor, Light Reading