Nortel creates metro Ethernet unit, cuts six products

16.05.2006
Nortel Networks Corp. CEO Mike Zafirovski Tuesday announced a new business focus that involves providing metropolitan-area fast Ethernet network products to service providers for handling bandwidth-rich IP video applications.

IP video networking technology is one of three areas where Brampton, Ontario-based Nortel intends to increase investment in research and development. The other two areas are WiMax and personalized multimedia services, which Nortel calls IMS, for IP Multimedia Subsystems. The company will increase its R&D budget in those three areas by US$100 million in fiscal 2006 and $67 million in fiscal 2007, Zafirovski said in a call with analysts and reporters. Nortel spent about $1.9 billion on R&D in 2005, about 18 percent of revenue, the company said.

At the same time he described the new focus, Zafirovski also said Nortel had realigned its product mix and was canceling six products or programs that cost $73 million in research and development in the last fiscal year. He would not say which products or programs he was referring to. He also mentioned three areas of significant scope reductions, dropping from $80 million in fiscal 2005 to $40 million in the current budget, but he did not name those either.

In addition, Nortel sold two product portfolios that cost $11 million in research dollars last year, including the blade server business, a spokesman said.

"We will not go public with every single product decision, and Nortel has never provided that level of granularity," Zafirovski said when asked for more details.

"We are a networks company, and we believe our ability to provide top quality solutions to enterprises and carriers will be a significant competitive advantage for Nortel," Zafirovski added. "We will make sure we align our offerings much tighter than ever before."