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Nortel seeks revival through 'hyperconnectivity'

Chief executive Mike Zafirovski is confident the 'megatrend' can propel the networking giant back to the forefront of the industry
Written by Tony Hallett, Contributor

"Anything that can be connected will be connected" — that's the essence of "hyperconnectivity", a term which Nortel has been trumpeting since the spring time and which looms large over most developments at the communications equipment giant.

Since becoming Nortel chief executive in November 2005, Mike Zafirovski has been concentrating on a revival at the Canadian vendor, after years which saw a slump in sales, large-scale layoffs and several episodes of restating financial results.

The revival is taking place based on still-strong spending on R&D; a well-documented partnership with Microsoft for unified communications; and some notable contract wins, such as at the Department for Work and Pensions in the UK (through another big partner, BT) and Royal Dutch Shell, the first major unified-communications customer of note.

But the trend it calls hyperconnectivity — Zafirovski and associates actually refer to it as a "megatrend" — gives more reason for optimism at a company which, by the admission of its own executive team, was only a few years ago able to offer "me too" products.

Zafirovski cites research from an academic at the Massachusetts Institute of Technology that forecasts more than a trillion nodes connected online over the next 15 years. "There is an opportunity for true mobile broadband," he said. "And there is a chance to completely redefine applications."

And that, the company reckons, means more opportunity. Zafirovski added: "Hundreds of doors are being opened that weren't before."

There are question marks over how bullish any communications vendor should be, given the horizon for such change and the short-term outlook of financial markets, and there are those who even point to the term "hyperconnectivity" as nothing novel.

But Zafirovski said: "Nortel is not driving this. This is going to happen."

In 2006 Nortel spent the equivalent of 18 percent of its revenues on R&D — a figure which the company says was at the top end of communications-equipment makers and should be slightly lower, at around 15 percent. It also spent too much of its time on legacy products and not enough on new — a "recipe for disaster", in Zafirovski's words.

But the chief executive — still not even halfway into his three- to five-year plan to get the company at the front of the industry again — is confident. "This is a company coming back, leapfrogging competition, driving real innovation for customers," he said.

Two of the biggest competitors keen not to let Nortel make much headway are networking giant Cisco and rapidly rising Chinese company Huawei.

Asked about Cisco's reputation as the undisputed leader in the sector and Huawei's rapid rise, with its traditionally low prices, Zafirovski said he welcomes the fight and would always sell on "quality, reliability and price".

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