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To: Jan Crawley who wrote (40019)	3/18/1998 8:55:00 PM
From: Glenn D. Rudolph	Respond to of 61433

Canada's Northern Telecom mobilizing Internet troops Reuters Story - March 18, 1998 20:30 %TEL %ENT %ELC %ELI %DPR %US %SP500 %CA %MRG NTL.TO NT CSCO LU T V%REUTER P%RTR (Adds chief executive's comments, analysis, background. All figures in U.S. dollars unless otherwise stated) By Lydia Zajc TORONTO, March 18 (Reuters) - The chief executive of Northern Telecom Ltd., one of the world's largest telecommunications equipment makers, is marshalling his troops to attack the next big challenge in the telephone world -- exploding Internet use. The phenomenal growth of the Internet is forcing companies that move voice and data along telephone lines to consider new ways of dealing with increasingly overburdened networks. Analysts say a battle could be brewing amid the different factions -- voice networking companies, data proficient firms and telephone giants -- as they plan how to stay ahead of the souped-up growth of modern technology, such as sending fax and high quality telephone calls over the Internet. Industry watchers believe customers will begin to clamor for more and better services starting in the second half of 1998. Nortel's Chief Executive John Roth, who took the top job at Nortel last fall after rising through the ranks from design engineer, has led the charge at the firm. "The task I have, as taking over as CEO, is what are the next big waves of change that hold opportunities for Nortel," Roth told Reuters in an interview at his Brampton headquarters near Toronto. "This (area) is becoming a major thrust for the company." Nortel, which ranks sixth amid telecommunications equipment makers around the globe and had revenues of $15.5 billion in 1997, already has some products to help phone companies deal with the strain of hour-long Internet calls on networks never meant to take that sort of load. The company built a network for a Denver, Co.-based Qwest Communications Corp., which allowed them to run their long-distance services 40 percent more cheaply and increased speed four-fold. And Nortel is updating its Internet Thruway product, which helps handle lines congested by data by re-routing Internet-bound calls to Internet service providers. But Roth, who spearheaded Nortel's 1991 fight to enter a mature wireless communications market and turned the company into the arena's third largest player, is focusing a bigger chunk of the firm's $2.2 billion research and development budget on the new technology. Nortel already spends 10 percent of its R&D on improved voice over Internet computer lines and other technologies, although the income from this area only represents five percent of its sales. Roth plans to boost R&D to 40 percent over the next few years and to involve more than 2,000 of Nortel's 73,000 workforce. "I'd be really disappointed if I couldn't (put) 40 percent of my research and development into this," said Roth, who makes comparisons to U.S. General Norman Schwarzkopf, who commanded the 350,000-member American force in the 1991 Gulf War againstIraq, when speaking about the subject. "So the problem is: how do I ramp from 2,000 people today who are working on this area?," Roth said. "And 2,000 people is a small army. I always think of how many Schwarzkopf divisions this represents." Nortel also has said it will acquire the technology if it cannot develop it. The company on Wednesday announced a $290 million deal to acquire Chelmsford, Mass.-based Aptis Communications, Inc. and merge the start-up firm, which provides access switches to network service providers, Internet service providers and others, with one of its units. Telecommunications consultant Ian Angus, based near Toronto, gives Nortel a fighting chance in the brave new world. "(The Internet) is, within North America but also world-wide, probably the fastest-growing telecommunications phenomenon," Angus said. "Everybody wants a piece of it. I think Nortel's got a good shot at it but it's also got some pretty intense competition." Competition includes data management firm Cisco Systems Inc. , Nortel's voice rival Lucent Technologies Inc. and phone giant AT&T Corp. . Frank Dzubeck, industry analyst and president of Communications Network Architects Inc. in Washington, D.C., said Nortel has a strong chance of becoming an industry leader because of Roth. "This guy's a pretty aggressive dude," said Dzubeck. "He doesn't go to sleep like the prior management did."