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

To: Kenneth E. Phillipps who wrote (6693)	9/5/2000 4:58:34 PM
From: Kenneth E. Phillipps	Read Replies (1) \| Respond to of 14638

Copied from the Antec thread: NORTEL'S CABLE CONUNDRUM Telecom Titan Hampered by ANTEC Channel Agreement in U.S. Cable Market SEPTEMBER 01, 2000 Six years ago, when U.S. cable operators initially began trumpeting plans to offer competitive local telephone service over their hybrid fiber/coaxial (HFC) networks, equipment giants Northern Telecom and Lucent Technologies quickly began developing cable telephony platforms. While Lucent soon abandoned its product, Nortel persevered, and its cable telephony technology is now the most widely deployed. In an interesting twist of fate, though, Nortel has been unable to realize the full value of its foresight due to a disadvantageous business dealwith ANTEC Corp. While Nortel originally viewed cable telephony as an unattractive, low-margin business in its own right, the company believed the products could be used to expand sales of its high-profit telecom switches into a new market segment. In 1994 Nortel tapped Electronic System Products (ESP) and Bell Northern Research (BNR), to develop a cable telephony protocol and transmission system that was later named Cornerstone. Shortly thereafter, EPS was acquired by ANTEC. Nortel formed a joint venture with ANTEC, called Arris Interactive, in 1996. Nortel originally controlled 75 percent of Arris with ANTEC owning the remaining 25 percent. In exchange for its larger equity stake, Nortel accepted a provision that ultimately proved problematic: it provided ANTEC with exclusive rights to sell Nortel and Arris cable products to top U.S. MSOs, a group that now controls more than 90 percent of American cable homes. Nortel is able to sell cable products to some small U.S. operators and those in international markets. For its part, Nortel has indeed been able to leverage Cornerstone to sell telephone switches to MSOs, executing on its original game plan. The problem is, the game has changed dramatically since that plan was conceived. The situation has created a conundrum for Nortel. The company has leading optical, IP telecom, operations support system (OSS) and integration solutions that could gain traction in the U.S. cable market, but due to ANTEC's exclusive sales rights for access equipment, Nortel cannot deliver a seamless cable offering.