Nortel's Asset Liquidation Threatens to Gut Innovative Communications Alliance with Microsoft

Strategic Insights -

Nortel's liquidation of its assets, which may result in the sale of its enterprise business to Avaya for $500 million, threatens to disrupt the Innovative Communications Alliance (ICA) partnership with Microsoft. The 3-year-old alliance, forged in 2006, aimed to jointly develop, sell, and roll out unified communications (UC) and voice over internet protocol (VoIP) technology to corporate customers. However, the partnership has struggled, with Nortel reporting a $3.4 million loss by 2008 and Microsoft expressing uncertainty about the impact of Nortel's bankruptcy filing in January 2009. The ICA partnership, which has delivered some tangible product integrations, is scheduled to end in 2010, and the latest developments may signal its permanent demise.

Key Takeaways:

  • Nortel's asset liquidation may eliminate its IP-PBX platform, Nortel engineers working with Microsoft on jointly developed products, and Nortel Global Services, the consulting arm providing glue for ICA.
  • The consequences of Nortel's collapse can be summed up in the failed $1 billion revenue prediction made by Nortel CEO Mike Zafirovski in 2006.
  • Nortel's UC equipment is critical to ICA, and a potential sale to Avaya could spell the end of integration work or joint development under the partnership.
  • The deal would include Nortel's enterprise business, which is on the block, and Avaya would gain access to Nortel's largest install base of VoIP customers.
  • Competitors, including Microsoft, may jump at the chance to steal Nortel's VoIP customers, further threatening the ICA partnership.
  • Nortel's engineers and consultants working on ICA may lose their jobs, and the company's middleware product set might be discontinued.

Statistics:

  • Nortel's enterprise business is valued at $500 million, according to reports by Canada's Globe and Mail.
  • The ICA partnership aimed to generate $1 billion in revenue over a four-year period, according to Nortel CEO Mike Zafirovski in 2006.
  • Nortel reported a $3.4 million loss by 2008, and the company officials were unwilling to discuss the Microsoft partnership in terms of earnings.
  • The partnership was forged in 2006 and was initially scheduled to end in 2010, with some tangible product integrations delivered.

Sources:

  • Network World
  • Yankee Group
  • Canada's Globe and Mail
  • Syndigate.info
  • Albawaba.com
  • Euclid Infotech Pvt. Ltd.