Nortel Buzzboard

I listened in on Nortel’s 2Q08 earnings call this morning, led by Nortel CEO Mike Zafirovski and CIO CFO Pavi Binning. You can access their presentations slides and hear a replay of the call here if you are interested.

Below are a few interesting points that I took from the call (not necessarily in order of the conversation on the call).

Revenue for the quarter was at $2.6 billion, up 2% year-over-year. For 1H08, Nortel’s revenue is now up 7% YoY.
Mike Z and Pavi Binning highlighted several times the continued progress with gross margins and operating margins. In the press release, Mike Z highlights: “We delivered gross margin of 43.1%, the seventh consecutive quarter of year-over-year improvement, and management operating margin of 4.3%, the eighth consecutive quarter of year-over-year improvement.”
The presentation highlighted gross margin improvements in Carrier Networks, Enterprise Solutions, and Global Services.
The presentation highlighted “significant improvements in G&A,” driven by cost reductions in IT and finance.
Mike Z said that in the second half of 2008, Nortel would be increasing and refocusing sales resources to focus on the growth segments of 40gig and unified communications
Mike Z said that: We have invested heavily in Enterprise and MEN, and we are starting to see the trajectory to growth in those areas.
A quick mention of an org change was mentioned, as Samih Elhage was announced as the new leader of the Carrier VoIP and Applications business.
Carrier Networks: quarterly revenue was down 2% YoY. CDMA revenue down 10%, with GSM/UMTS revenue up 11% YoY. The decrease in CDMA revenues, along with comments during the presentation of a slowdown in U.S. carrier spending were discussed during the call. One analyst asked about Nortel’s CDMA market share, to which Mike Z responded: “…certainly over the last couple of years we have gained [CDMA] market share and we don’t expect to lose that going forward.”
Enterprise Solutions: revenues were up 3% YoY. Gross margins increased while management operating margins decreased, reflecting increased marketing and R&D spending in the area. An analyst point out that the enterprise businesses still didn’t have a positive margin, and asked Mike Z how confident he was in this changing in 2H08. Mike Z commented that gross margin in the enterprise business had improved nicely in the quarter, and that Nortel expects enterprise to have a positive OM in the 2nd half.
Metro Ethernet: Revenues were up 4% YoY, with gross margins flat and management operating margin up. Several times during the presentation, Mike Z highlighted the growing momentum for Nortel’s 40gig solution. Nortel now has twenty 40gig wins, plus five tier one trials. Mike highlighted that at the last update (the analyst day event) that number was at 14 wins.
Global Services: Revenues were up 9%, with higher gross margins and management operating margins. A quick calculation shows that Global Services accounted for just over 20% of Nortel’s total revenues in 2Q08.

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Will the day ever come when your average white collar worker won’t have a phone at his (or her) desk?

Earlier this week IDC put out a press release entitled “IP Telephony Holds Strong in the Face of Unified Communications (UC) Hype,” highlighting the findings of their 2007 IP Telephony report.

IDC says IP-PBX and IP Phone shipments remained strong in 2007, even with the introduction of desktop unified communications solutions last year from Microsoft and IBM. The absence of a cratering IP-PBX market shouldn’t be much of a surprise to anyone — even Microsoft doesn’t expect people to rip out their phone systems and replace them with OCS anytime soon. …

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The Nortel and Microsoft Innovative Communications Alliance (ICA) has a new public customer today — arvato systems — one of the first ICA customers in Germany. arvato systems provides clients with IT services supporting the the use, management, and distribution of media (such consulting, concept design, development, implementation, and operation). This is a natural extension of their parent company, global media and communication services provider arvato AG.

Their new UC network pulls together voice, email, conferencing, video and instant messaging into a single interface (Microsoft OCS 2007). But it’s the services side of this deployment that makes it an interesting win.

In our UC alliance with Microsoft, Nortel has emphasized the services revenue potential that the …

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Anytime you invite dozens of the region’s most important media and analysts to come and talk to your senior execs, it’s probably a good idea to have a lot of news to talk about.

That’s exactly what Nortel is doing this week with a panoply of press releases related to the APAC region — all in support of this week’s Nortel Asia Summit in Sydney, Australia.

I’ve already talked about two of the releases, the 40gig win with Southern Cross Cables and the appointment of new leaders for the APAC region, but most of the week’s news has been focused on new unified communications deployments. While some of last year’s media hype about UC has quieted a …

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Joel Hackney, Nortel’s president of Enterprise Solutions, just finished his presentation at IR day a bit ago. Again, you can watch this all live here, and also get the slides on the same page.

Joel talked about the progress in enterprise - here are some notes I took on some of the more interesting points:

Joel said there has been a 4X improvement in Nortel’s enterprise product POR (plan of record) predictability, with a 70% improvement in on-time POR delivery. Basically this means we are much better at delivering on-time the products and features that we’ve promised.
Joel says Nortel’s enterprise group is on track for profitability in 2H08.
Joel talked a little about the hot topic of energy efficiency, …

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One recent news item that I didn’t get to talk about in the last few weeks with all the other news about 40 gig and VoiceCon (as well as a week of vacation) was the joint news that Nortel announced a few weeks ago with Microsoft.  This area is particularly close to my heart as I have personally supported this alliance for the last year and half.

In our joint release with Microsoft, we announced that four new OCS-based solutions from our Innovative Communications Alliance were now generally available.  In total, Nortel and Microsoft have now brought 10 solutions to market related to the alliance.  The alliance now has over 600 wins, and we highlighted 5 new OCS-based joint customers in the release.

Earlier today I attended an internal Q&A session in Richardson for Nortel employees hosted by Ruchi Prasad.  Ruchi is Nortel’s VP and GM of the Innovative Communications Alliance.  She answered various questions about the alliance’s progress, our solutions, the competition, etc.

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This is VoiceCon week, and as expected unified communications is the hot topic. Vendors across the industry are trumpeting their UC features, solutions and benefits to anyone who will listen.Nortel has of course been talking about UC for quite a while, most visibly through our Innovative Communications Alliance with Microsoft. And this week is no different for us, with multiple UC announcements that we issued around the show: True unified communications doesn’t just work in an office or on your desk phone…mobility is key. This week Nortel unveiled a host of new Mobility for UC features and solutions. The goal is not just to extend the functionality of your office phone …

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Are you a unified communications rock star?  That’s the question posed in this new lighthearted multimedia quiz on nortel.com.  Take our quiz and we’ll let you know if you’re Rock Star material: http://www.nortel.com/multimedia/flash/demo/rockstar/

Nortel and Microsoft are working to make being a technology rock star easier.  In last week’s edition of Network World, Jim Duffy charts the progress of Nortel and Microsoft’s Innovative Communications Alliance to develop UC solutions.

And in case you haven’t seen it, Nortel has just launched a new series of TV commercials, the first of which focuses on unified communications.  See below for the “long version” of Nortel’s new unified communications TV spot.

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Microsoft has recently qualified Nortel’s CS 1000 as the world’s first IP-PBX tested to work seamlessly with Microsoft Office Communications Server 2007. 

In October 2007, Microsoft formally introduced its Unified Communications Open Interoperability Program as part of its larger unified communications launch.  This exacting qualification program was created to ensure that customers have a seamless experience with setup, support, and use of qualified telephony gateways and IP-PBXs with Microsoft’s unified communications software.  

With Nortel’s official qualification (which you can see on Microsoft’s site here) the Nortel Communication Server (CS) 1000 is now the world’s first IP-PBX to be qualified Microsoft Unified Communications Open Interoperability Program for enterprise telephony infrastructure.  Not only that, but it has also been proven to support Dual Forking and Dual Forking with Remote Call Control (RCC).  

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I read an interesting article today at No Jitter. If you haven’t heard, No Jitter is the evolution of BCR. Eric Krapf highlights comments in an interview with Mark Straton of Siemens around the eventual move of voice into a software-based service, and the need for voice vendors like Siemens (and Nortel) to work closely with the likes of Microsoft and IBM that will “own the desktop”.

Of course Mike Z and Nortel have “voiced” this opinion since we announced our Innovative Communications Alliance with Microsoft in June 2006. And last October Nortel unveiled a broad line-up of unified communications solutions that closely interwork with Microsoft’s new OCS 2007 platform.

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