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

To: OrionX who wrote (6409)	8/3/2000 10:04:07 AM
From: Kenneth E. Phillipps	Respond to of 14638

Canadian underdog shows its teeth page 5: Sidebar: Interview with John Roth John Roth is an engineer by training who made his reputation back in 1991, when he headed Nortel's first wireless division. Although Nortel came late to the wireless market, Roth focused the company's wireless efforts on taking advantage of the switch to digital technology -- a strategy that paid off big. By the time Roth began expanding Nortel in 1998, wireless accounted for more than 20 percent of the company's revenues. Now Nortel's CEO, Roth is now busily architecting the company's future and is relying heavily upon corporate acquisitions to add new technology and market share to Nortel's networking businesses. Upside: What advantages does Nortel Networks have over its competitors, particularly Cisco and 3Com? Roth: Their future growth will depend on how well they can become service providers. The enterprise market where they've had most of their successes is going to be limited as corporations decide that their internal networks have grown so large that it makes more sense to ask a service provider to handle it rather than attempt to support it themselves. That's why you see Cisco, for example, finally moving into the optical business. However, building big optical networks is not an easy task. Nor is it the only answer. I ought to know, because Nortel Networks has been at it for a long time. This is one area where we excel worldwide and have tremendous skills. Nortel acquired Bay Networks a year and half ago. How has that integration process gone? It's going extremely well and we're making that "right-angle turn." Our progress is clearly reflected by our high employee morale and our increasing revenues worldwide. When we acquired Bay, we were a company in transition, moving from the voice market, which has a 3 percent growth per year, to the data market, which grows at around 30-40 percent a quarter. We're also focusing on building the optical Internet, the wireless Internet, wireless telephony and e-business. As we achieve higher and higher plateaus within our industry, we'll continue to transform to stay ahead of our competitors and set the pace for disruptive technologies. Most of the top management from Bay has left, though. Why is this? First, we have kept a large number of tremendously talented people from Bay in various layers of our management and middle management. Some of our former executives discovered new and different opportunities in other areas, and we wish them the greatest of success. Most of Nortel's revenue comes from high-margin proprietary systems. How are you managing the transition to lower-margin, open systems? It's a myth that voice networks are proprietary. Voice networks are actually quite open compared with the data networking world, which for years was characterized by various proprietary offerings like SNA, DECnet, and so forth. After all, it was Microsoft—not a voice network supplier—that got hauled into court for acting like a monopoly. And it was Cisco that raised the price of routers, in contradiction to Moore's law. It's also a myth that voice networking equipment commands high margins. When we acquired Bay, we learned that Bay's margins were higher than ours. Nortel Networks has always lived in an open environment where competition has pushed prices down. Nortel has been characterized as having a relatively conservative corporate culture. What, if anything, are you doing to change that? It has definitely changed. Today, we're a fast-moving team and have become much more forward looking. I've removed a lot of layers from the management team and much of the bureaucracy that caused us to miss opportunities or bring progress to a grinding halt. The acquisitions have also forced us to eradicate the "not invented here" disease. Acquisitions tend to be messy affairs. What have you done to smooth the transition for companies that you've acquired? We've developed our own approach to doing this. We've learned how to ramp up our sales volume quickly for newly acquired products. For example, one company we acquired told us they expected to do $50 million in revenue in 1999. They ended up doing $200 million -- far more than they expected. Nortel Networks also employs 25,000 engineers, so we ask the executives from the acquired companies to pick and choose the engineers they need to get their job done. In fact, word is getting around that we are good to the companies we acquire. That's made our job much easier because we can target companies that a few years ago wouldn't have even talked to us. We've also been selected recently by Fortune as one of the Top 100 companies to work for. We believe our employees -- the old ones and the new ones -- are pretty happy. Lucent appears to be stumbling. Is Nortel likely to suffer from the same problems in the future? Lucent, like Cisco and other companies in this space, have their own set of problems related to being able to deliver the high-speed networking products and services their customers want and need. Fortunately for Nortel Networks, we were already there with high-performance networking products, like our recently announced system that will be able to move 6.4 terabits of information on a single optical cable. Our products allow carriers to fully utilize the enormous investment they've already made by putting optical cable into the ground. How long do you think it will be before the optical Internet becomes a practical alternative to the current PC desktop/server/laptop computing model? People who sit at their desktop are always looking at yesterday's information. People want to get at information that's new and current. As more and more storage becomes available across the network, you're going to see fewer people depending upon local storage for their information needs. What will be the "killer application" that makes high-speed Internet an absolute must for consumers? The merger of AOL and Time Warner promises to change the entire world of entertainment. It reminds me of the old days when companies like RCA and NBC had all the elements -- broadcasting studios, production facilities, television stations, and television manufacturing plants -- ceate the television industry. The AOL/Time Warner partnership opens up the possibility of providing a whole range of content across the Internet, including video-clips. This will create tremendous pressure for an access network that's capable of handling enormous flows of data. The process of building that network is one of many areas where Nortel plans to be a world leader. Geoffrey James (www.businesswisdom.com) is a frequent UPSIDE contributor and the author of the book Success Secrets from Silicon Valley (Times Books, 1998). upside.com

To: OrionX who wrote (6409)	8/3/2000 12:21:53 PM
From: RetiredNow	Read Replies (1) \| Respond to of 14638

You know, I think there is a misconception on this thread as to what IT really does. IT does not manage printers and networks, etc. IT builds web services and sites that help employees throughout the company be more productive. For instance, instead of having a whole staff of people manning the phones to listen to customers complain and then a whole other staff to resolve those disputes, we can create a web dispute submission application. Then we save money on those people who would otherwise have to man the phones. This is one example of many, many applications that the web can be used for. So when a company like Nortel outsources this group, they are outsourcing the folks that need to work side by side with the business employees within the company, in order to make them as efficient as possible. Outsourcing this talent, means they don't want to focus on keeping the business machine well oiled. Why do all of you think Cisco is so lean and mean? It's not a miracle. It's Cisco's judicious and heavy investment in webifying all their internal business processes. This is how they have the highest revenue per employee of any of the networking companies. They leverage their employees throught the use of technology. If any of you don't get this, then you aren't really plugged in to what the Internet really can do. The public Internet is only the tip of the iceberg. The companies that use the Internet in their daily existence are the ones that are building sustainable competitive advantage.