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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Techplayer who wrote (6132)	6/18/2000 8:14:00 PM
From: Kenneth E. Phillipps	Read Replies (1) \| Respond to of 14638

Roth says Nortel's wireless competitors are "IP challenged". AN INTERVIEW WITH JOHN ROTHAn interview with Nortel's John Roth by Larry MacDonald One way to gain insight into the investment prospects for a company is to interview senior executives. I did this recently with a visit to the Brampton headquarters of Nortel Networks to talk to the top guy himself, John Roth. All in all, I came away impressed with his grasp of the technology and business issues - he seems to have the bases covered. Here are some excerpts: 1. On competitive position Question: Is Nortel pulling ahead of Lucent and Cisco in the Internet infrastructure industry? Roth: A lot of people see us as having a long-term strategic advantage. If we continue to execute crisply and be agile, there is no reason why we can't continue to lead the industry. Cisco is a tremendously powerful marketing company. I have huge respect for their sales and marketing prowess. But they don't have the depth of understanding we have in optical networking. This is not a simple technology. I think Cisco underestimates the complexity of making these systems perform. 2. On acquisitions Question: Nortel has acquired many new companies in the last two years. How do you retain key staff in the acquired companies? Roth: We need to realize we're not going to retain them all. Many people go into the acquisition to make a fortune. Their plan was always to sell the business and leave. We therefore have to decide how to set up the deal for the people who want to leave so they do a smooth transition from themselves to their successors, besides retaining key people below the founder's level. So we construct a deal typically with an earn-out that is tied to some market milestones. That buys us a period of time to make a smooth transition. Basically, they don't get paid when we do the acquisition. They get paid when certain market events occur. So they are going to stick around for the payday and they are going to be highly motivated to make sure it is going to happen. That gives us time to bolster the team with some long-term Nortel employees. Now, this is turning out to be a formula for us. We are almost at the point of "productizing" how we assimilate companies. Heck, we've done 14 or them so far. It takes practice to do these things, and we are getting a lot of practice these days! 3. On preparing for the next inflection point -- the wireless Internet Question: Yankee Group and Herschel Shosteck Associates are two market research organizations saying Nortel is No. 1 in terms of positioning for rolling out the wireless Internet. Why is this? Roth: The wireless Internet is not about wireless communication, it's about the Internet. How you use the wireless Internet is quite different from using a cell phone. It's going to be an "always on" network. You aren't going to place a call to use the Internet; you are going to pull out the wireless device to see if you have email. Yes, you are going to need radio signals to do all this, but what is really important is that you have an efficient Internet Protocol - IP - based network structure to carry the traffic around. Nortel was one of the first companies to specialize in building IP networks for customers in the wireline context. Nortel has found ways of dropping the cost of carrying data so that some of these carriers can now make a profit. That was a huge challenge. We can now bring our know-how to the realm of the wireless Internet. Whether we build the IP network for wireline or wireless frameworks -- it's the same problem. Our rivals in the wireless industry, meanwhile, are what I call "IP-challenged." They don't know enough about IP to be able to do this well. Motorola doesn't have any IP knowledge, Nokia has no knowledge of IP structures, Ericsson had a change of CEO because he couldn't get into data, and Lucent spent $20 billion on an ATM switch company, Ascend Communications. This article first appeared on Quicken.ca June 15, 2000. Larry MacDonald is author of Outperforming the Market: A Case Study Approach. He can be reached at larrymacdonald@hotmail.com.