Interview: Desch Discusses Nortel's 'Secret' Weapon: Bay Networks' Expertise
wirelessweek.com
From the February 15, 1999 issue of Wireless Week
Within the past few months, Nortel Networks has experienced an acquisition and internal
restructuring. To gauge the progress of the changes, Wireless Week's Dallas reporter, Bruce
Felps, sat down with Nortel Network's President Matt Desch. Desch explained how the changes
affect the company, its customers and the wireless industry. Desch also reflected on industry
consolidation, enhanced 911 possibilities and the emerging wireless IP market.
Wireless Week: In the five months since Nortel purchased Bay Networks, how has that
acquisition fit in with Nortel's plans and what has Nortel gained?
Desch: It was expected to be at the core of everything we did because of the expertise we
obtained and the products we acquired. In fact it has been. The first question everybody asked
was, 'Could a big company like Nortel integrate successfully with a much smaller Silicon
Valley-type startup?' I think our goal had been to make it a textbook case of the success that
could be achieved through integration. It has been a lot smoother than most people probably
expected. Our vision of the future, which we have called 'unified networks,' is coming together.
WW: Have the cultures of the two companies meshed?
Desch: The cultures are clearly coming together. I think it's been very positive because what we
had was a culture of people who are very accepting and ready for change and were looking for a
template to model themselves after. Along comes a change agent for the company, and everyone
was very quick to embrace that change. Another thing we did was let Bay operate pretty intact. In
fact, we did a reverse integration of Nortel into Bay. In some ways we really wanted to move
toward the Bay model [rather] than the other way around. I think it's a lot harder if the big
company tries to wrestle the small company into its way of thinking.
WW: Does the merger with Bay give you an advantage regarding wireless IP applications?
Desch: Absolutely. We consider Bay our secret weapon going into the future. The concept of
unified networks includes wireless. In fact, wireless is an important component in this concept we
call unified networks. The concept we describe is mobile IP or mobile Web tone. It's the marriage
of the traditional technologies we've deployed over the last 10 years in wireless and all these new
Internet technologies that Bay brings to bear. We've already seen new products that are emerging
from the engineers getting together from both sides not in just 3G but in 2G data evolutions in each
of our different technologies and also in our fixed access space where we are moving broadband
and moving to IP. The combinations are quite effective.
WW: How big will the wireless IP market be? How long will it take to develop into a viable, active
market?
Desch: (laughing) If I could answer that question, whole conferences would have to be cancelled.
That's at the core of what everybody wants to know. I only know one thing: It's going to be a
whole lot bigger than what it is today, and it's going to get there, like everything else, a lot faster
than everybody expects.
WW: What kind of market will it be?
Desch: I don't believe there's going to be a single solution or a set number of solutions, nor will
there be a single device or set number of devices. I believe it will be embedded in all kinds of
things, there will be all types of devices. Diversity of both applications and devices will be the rule.
I think there will be hundreds if not thousands of different ways of connecting when you can put
some sort of connection in a device and work in either the vertical or horizontal space. The mass
market may take a couple of years, but I think we'll see all kinds of business applications that will
connect people.
WW: Will the mass market depend on technological advances or declining prices points of
devices?
Desch: I think it's going to be, like anything else, marketing, distribution, branding, price, all the
other things necessary for a new market to take off. Clearly there's some technology required. We
need higher bit rates, devices that are capable of the kinds of interactions with a person that are
necessary but yet mobile so they are small but still very usable.
WW: How does industry consolidation affect Nortel and its client base? Does it reduce the
number of potential customers or does it increase site potential within each company?
Desch: It does both. It makes for exciting times within the industry. Nortel Networks has
customers on the acquiring side and the acquired side, as do all of our competitors. As the planets
change in orbit, all of the industry has to quickly respond to the changing orbits to address the new
entities. In most cases it's been good for us. If we have a small customer that gets acquired,
suddenly we become part of a larger network.
WW: Why did Nortel get out of the handset business?
Desch: We recognized that this is an industry that unless you have truly invested and committed
yourself there is no way to become a top two or three player. It was going to be very expensive.
We certainly believed we could do it, and still believe we could do it, but not without totally
committing ourselves and our company to do it at a great, great expense.
WW: Having had the experience in the handset market, plus your experience in the infrastructure
market, do you see a leader in handset-based and network-based E911 technology emerging?
Desch: I think there are pros and cons to each approach. The handset approaches are probably
more accurate, at least when you're outdoors, so there are fewer chances for error. They're
simpler, in many ways, to implement faster. Perhaps the customer might end up paying for it. On
the other hand, there are millions of terminals out there that wouldn't have this capability, so a
network-based solution could potentially be quicker to deploy to access the overall market space.
It might also provide carriers value in future services they might be able to deploy as a result of
network capability. I don't know which one will win, but I wonder if it won't be a combination of
both.
WW: Did the alleviation of the handset business lead to Nortel's restructuring, which was
announced last month, or were there other contributing factors?
Desch: I don't think the two were related at all. The handset decision was made sometime in the
middle of last year. The restructuring related to the next several years and our plans to dramatically
improve the efficiency in the way we do business. It's primarily focused in our operations areas,
around streamlining our relationships with our customers and using technology like the Internet
more effectively. We knew that would ultimately affect a number of people in those areas, so the
announcement was sort of signaling our intentions that we think we can improve our bottom line
and improve the way we interact with customers. I think there are a lot of areas we're working on
for the future, but nothing specifically is affecting any employees yet.
WW: If it does affect employees, would they be here in Dallas or in some of your other locations?
Desch: It's hard to tell right now until the plans occur. It probably will affect a little bit across
everywhere in Nortel, particularly in the operations and manufacturing areas but it could be across
the company. It's not an intention to describe one area.
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