Mike Zafirovski, CEO of Nortel was in an upbeat mood as he addressed a press conference in London this past Wednesday.
Flanked by his new management team, he claimed that by virtue of the company’s expertise in OFDM and MIMO technologies (it has over 40 related patents) it can take a leadership role in a number of ‘4G’ wireless technologies, including mobile WiMAX, CDMA Rev C and LTE (Long-Term Evolution).
OFDM (Orthogonal Frequency Division Multiplexing) and MIMO (Multiple-Input, Multiple-Output) radio technologies form the cornerstone of this 4G wireless crop.
“Mobile video is the next great application disrupter and the economics of 4G to deliver that are far more compelling than legacy networks,” said Zafirovski.
However, Zafirovski didn’t see 4G wireless as a significant revenue opportunity for Nortel until five or six years’ time. In the meantime, increases in traffic over 3G and fixed broadband networks, courtesy of video-based applications, will play into Nortel’s hands – argued Zafirovski – as operators will need to look at investing more in their backhaul networks. That’s where Nortel’s Metro Ethernet and optical networking portfolio comes in.
Zafirovski has, of course, made far-reaching changes to Nortel in his nine months at the helm. With no profitable growth since 1998, Zafirovski’s strategy to turn the company around has included narrowing the product portfolio and to allocate more R&D to specific technology areas such as IMS, WiMAX and IPTV.
He has also flagged up three focus areas: ‘mobility and convergence’, which includes WiMAX, carrier optical networking and NGNs; ‘enterprise transformation’, which overlaps with the carrier network focus; and ‘services and solutions’, or professional services, which are wrapped around its hardware and software (such as systems integration, network deployment and management, and application hosting).
Nortel’s strength in services and solutions was bolstered recently by its alliance with Microsoft.
Zafirovski has also set his management team stringent operational targets. He wants to see wafer-thin operating margins of 0.4 percent in 2005 increase to double digits by 2008.
He also doesn’t want to be in any business area that can’t provide Nortel with at least a 20 percent market share. It’s a criterion that led Nortel to selling its UMTS access business to Alcatel, which only had a 5-6 percent market share.
The 20 percent target in all its lines of business seems a tall order for Nortel, particular in IMS where Ericsson and Lucent/Alcatel are strong, but Zafirovski insisted that another divestiture of a Nortel business unit was ‘not imminent.'
The CEO further argued that, particularly in the EMEA region, Nortel was on the verge of an ‘inflection point’.
EMEA currently accounts for 25 percent of Nortel’s total global revenue (US$10.5 billion in 2005), but, encouragingly, 50 percent of that sum comes from its next-generation portfolio of products and services. “At the moment, the bulk of this next- generation revenue comes from Metro Ethernet and VoIP,” said Darryl Edwards, the newly-appointed president of Nortel’s activities in the EMEA region.
To underline its EMEA growth, Nortel announced today a series of contract wins in its three focus areas. Under Nortel’s ‘mobility and convergence’ banner, Golden Telecom in Russia is expanding its optical network; Canadian-based wireless access provider Craig Wireless, for its operations in Greece, is rolling out a fixed WiMAX network from Nortel in four cities; and the COMCOR Group in Russia is providing VoIP and broadband services in Moscow via a Nortel IMS- ready platform.
For its ‘enterprise transformation’ segment, new customers moving to Nortel IP networks are The Daily Telegraph and The Economist Group, while for ‘services and solutions’, Swisscom has launched business voice services operated by Nortel Global Services, based on Nortel’s IMS-ready technology.