Nortel's Soft Sell
Nortel Networks Corp. (NYSE/Toronto: NT) as a software company? You don’t say. But yes, that’s the vision that Nortel’s executives are pushing these days.
Nortel’s CEO Frank Dunn said yesterday at the company’s media and analyst day that he sees the company moving toward a software and integration model. That explains Nortel’s recent moves to outsource nearly all its manufacturing in a deal it’s negotiating with Flextronics Corp. (Nasdaq: FLEX). (See Nortel Talks Outsourcing.)
Meanwhile, Nortel’s CTO Greg Mumford told Light Reading in an interview that Nortel’s focusing its R&D investment on software development, particulary packet-based communications applications based on protocols such as SIP (Session Initiation Protocol).
Here’s some of what Mumford had to say:
Light Reading: So SIP is a big deal, is it?
Mumford: It’s a big deal to the service providers because it gives them a way to create new revenue services.
When I think of SIP I think of a protocol. It’s a protocol that allows applications outside of the network to function with applications inside the network. It’s an interface. With a SIP interface a carrier could decide that a third party has a good application and they can just interface with that… It adds service velocity.
Light Reading: So, Frank Dunn said today you are a software company. That surprised me. I thought all along Nortel sold hardware. Am I that dumb?
Mumford: Nortel for a long time has had a very significant part of its investment in software. It’s just that it’s been bundled with hardware. But over time that changes.
With MCS [Nortel’s Media Communication Server product], for example, we’re selling just the software. We need to ring the cash register on the software only. With hardware you put silicon in and you also have intellectual property. You need to be paid for both. When you sell software, all you are selling is the intellectual property.
If you look at any of our optical products, a lot of it is software. In the services edge, the Shasta product is IP processing. If you look at our Passport product, the processors and fabric we buy from others. Our role is the software development. And VOIP is software.
Light Reading: What do you make of this sudden land grab for multiservice products? For example, in just the last week Juniper and Tellabs have made multiservice announcements. [See Juniper Hatches the M320 and Tellabs Enhances Multiservice Routers.]
Mumford: We’ve identified multiservice with the edge, and we’ve done multiservice for years with the ATM in Passport and tag-label switching. Edge routing is now coming together with that. We also have IP processers at the edge, like Shasta and Alteon [Nortel's IP services and service-layer switching products]. We see all of this coming together. The recent Juniper announcement of a multiservice edge box validates that. We’ve identified the functionality in separate boxes. As far as one product that does it all, we have an investment going on, but we haven’t announced any new product per se. Light Reading: So what’s Neptune? We’ve heard that’s your multiservice box.
Mumford: Neptune is a code name of a product development. We’re investing in a next-generation services edge box.
Light Reading: So it's your multiservice box?
Mumford: It hasn’t been announced
Light Reading: Now it has!
[Mumford wrinkles his brow and promptly boots the reporter out of the room.]
— R. Scott Raynovich, US Editor, Light Reading