Nortel bounces back, reaches out with Ethernet

As Nortel Networks' fortunes turn for the better, the company expects a big part of its future rests with delivering huge bandwidth to enterprise and carrier customers much more inexpensively than ever. To that end, the Toronto-based telecommunications equipment supplier is enabling customers to use Ethernet instead of MPLS for business services.During a conference with financial analysts in Ottawa earlier this month - an event closely following positive first-quarter results - chief executive Mike Zafirovski and chief technology office John Roese outlined of the company's hyperconnectivity philosophy, of which Ethernet is an important aspect. Nortel describes hyperconnectivity as communication anywhere, anytime on any device. The company has already scored a big win with "Carrier Ethernet," also called provider backbone transport (PBT). British Telecom announced in January that it had selected Nortel's PBT as a key component of its next-generation network. Carrier-grade Ethernet will be used to transport high-bandwidth services such as mission critical business applications and full streaming video.(For more on Carrier Ethernet, see "Carrier Ethernet boldly goes...".)According to Roese, one of the key reasons BT chose Ethernet was the cost savings and network management simplicity compared to competing MPLS services. MPLS "is fine in moderation," he said during his 45-minute presentation to analysts. "It just is not appropriate when you have to put it everywhere, because it was never designed for that. It does not yield the economic benefits that the current technological environment requires. We need simpler, more effective, less complex technology in carrier wireline transport."The cost savings will appear not only on the capital expenditure side, but also on the operations side, with lower expenses. "When you start seeing 40% to 60% reductions in capex and opex to deliver the same service you were doing before, that's compelling," Roese said. The market potential for Carrier Ethernet services is solid, according to Nortel's figures, which show that this space will experience a 26% compound annual growth rate between 2007 and 2009. Roese said the entire Carrier Ethernet market, even at this early stage, is worth nearly $7 billion. "We feel pretty good about ability to execute in that space," he said. After years of financial struggles that saw the company chop thousands of jobs and restate earnings, Nortel appears to be on the road to recovery. The first-quarter financial results demonstrated that the company is turning around, posting strong revenue growth and higher-than-expected margins. The financial analysts at Robert W Baird & Co. Inc. are bullish on Nortel over the next couple years, predicting that revenue will accelerate in the second half of 2007 and continue to ramp up next year.

Nortel bounces back, reaches out with Ethernet

News | May 23, 2007

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