At that time, Microsoft said it would team up with vendors such as Hewlett-Packard Co., Motorola Inc. and Siemens AG on unified communications initiatives. But Microsoft and Nortel detailed a more expansive set of plans, including the eventual development by Nortel of a full suite of networking hardware and software that can work with Office.

Nortel CEO Mike Zafirovski predicted during a jointly held teleconference that the alliance will generate about US$1 billion in added revenue for the struggling company over the next few years.

Mixed reaction

But Nortel users were mixed on whether they think the deal with Microsoft will give the Brampton, Ontario-based vendor a big boost in its efforts to rebound from a series of losses, financial restatements and management changes.

Victor Bohnert, executive director of International Nortel Networks Users Association Inc. (INNUA) in Chicago, said the alliance should help Nortel re-establish its reputation as a market leader. "This represents two powerhouses coming together, and I don't think there's too much of a downside to it," he said.