Nortel CTO Gives Uninspiring Interview

In an interview with CNET’s News.com, Nortel’s CTO John Roese, who joined the company in June, suggests, perhaps with some justification, that the company was hopeless adrift before he came aboard.

Roese seems to think he can set the right course singlehandedly, but, when asked where and how Nortel will re-establish itself as a market leader, he offers hackneyed, unconvincing, or vague replies.

According to Roese, Nortel will emerge as a leader in 4G wireless — even though he defines that market ambiguously — and in enterprise networking, where he foresees "hyperconnected" networks.

He says Nortel is second to Cisco in enterprise networking today, which is correct, but he fails to make a compelling case that Nortel will be the benefactor of potential Cisco missteps. From my vantage point, I can see Foundry, HP ProCurve, and perhaps even Extreme Networks picking up more share from Cisco in the next two years than will Nortel. From a marketing standpoint, Nortel has fallen off the enterprise-networking map.

When discussing his biggest challenge since joining Nortel as CTO, Roese says the following:

We really have to change the culture of the company. As CTO, I need to establish a technology vision and then evangelize that vision to create a market for the technology. I’ve been trying to drive the R&D folks to think about what they do in terms of creating products. That hasn’t been the way people at Nortel have thought in the past.

I’m not sure Roese has the process right. Not once in the above paragraph does Roese mention customers. In fact, he says the word "customers" once in the entire interview. He doesn’t seem to recognize that developing compelling products and solutions involves more than the genius of a CTO. It involves primary market research, lots of time spent understanding what customers are trying to accomplish and why, and then it requires the creativity and innovation to define and develop products that solve their problems.

The CTO’s vision should be distilled and communicated only after he understands the company, its customers, and its markets. Judging by the text of this interview, I’m not sure Roese has gone through that process.

In the same interview, Roese mentions that Nortel is putting more emphasis on partnerships, and he cites the company’s unified-communications partnership with Microsoft as an example of how the company will work in concert with other vendors. I’m not sure that was the best example, particularly since Microsoft’s ultimate intent is to benefit and learn from Nortel so that it can eventually embed its own VoIP technology into Office Live Communications server. Over the long haul,  I don’t see Nortel getting reciprocal value from that relationship.

I think Nortel and Roese need to deliberate further before they decide where to place their bets. Before they make those choices, they should think about spending more time with customers and channel partners, getting a clearer idea of what sort of mandate the market is willing to extend to a remade Nortel.

McAfee Beats Street Estimates for Q3, but Analysts Wary

McAfee posted strong third-quarter results, but market analysts remain wary about the company’s future prospects, especially in its core antivirus market.

As reported by the Associated Press, McAfee yesterday reported a preliminary adjusted profit of $58.2 million, or 36 cents per share, on $287.70 million in revenue. Analysts were expecting the company to earn 36 cents per share on $275.7 million in revenue, according to a Thomson Financial poll.

Despite the good results, most market analysts and industry pundits believe the company’s best days might be behind it — and they don’t expect McAfee to surpass expectations again in the near future.

Said Jeffries analyst Katherine Egbert:

The beat was an encouraging sign and brought some welcome relief from recent negative news regarding stock options and management turnover. . . .The persistence of weakening long-term fundamentals in consumer antivirus, an uncertain margin trend, and the ongoing stock option review are all significant risks.

Egbert also noted strong competition from Microsoft and Symantec.

McAfee’s stock-option review already has claimed the company’s chairman and CEO George Samenuk and its president Kevin Weiss. Before and since the executive shuffle, McAfee has been rumored to be an acquisition target.

Other market analysts, including AG Edwards’ Kevin Buttigieg and Morgan Keegan’s Chris Hovis, were similarly skeptical of McAfee’s ability to experience continued prosperity, with Hovis noting the company’s "muted" fourth-quarter guidance.

Cisco Acquisition Adds Mobile Presence to Unified-Communications Solution

Cisco Systems announced yesterday that it had agreed to buy mobile-phone software company Orative Corp. for $31 million in cash.

Based in San Jose, Orative has 33 employees and makes an application that allows users to access corporate directories from cell phones and smart phones, while also providing presence information on whether the contact can be reached via text, voice or other means.

Orative’s Enterprise Software — comprising a server and agents that need to be installed on handsets — will work with several of Cisco’s existing voice products, including Unified CallManager for call control, Cisco MeetingPlace for collaboration, and Cisco Unity for voice mail.

The Orative clients run on Symbian OS handsets, RIM’s Blackberry devices, and BREW-based handsets. Cisco said it chose Orative for acquisition partly because of the breadth of its handset support.

Don Proctor, senior vice president of Cisco’s Voice Technology Group, which Orative will be folded into, explains in the following quote that the acquired company’s technology will help Cisco deliver a so-called "quadruple play" of unified-communications services.

Cisco’s Unified Communications system enables businesses to leverage their Cisco networks as a platform to provide the quadruple play—voice, video, data and mobility services—through a superior user experience. The Orative acquisition will allow Cisco to further deliver on its promise of extending the unified communications experience from the network services to mobile devices.

Founded in 2002, Orative had partnered with Cisco on several technology projects. Cisco said it expects the acquisition to close in the second quarter of next year.

As reported in eWeek, Cisco launched its United Communications system in the spring of 2006. In June, the company announced that it had purchased Metreos of Austin, Texas, for $19.8 million, and Audium, for $28 million, to bolster its IP telephony and IP contact-center capabilities, respectively.

This acquisition, like the other two, moves Cisco increasingly into competition with middleware and application vendors and away from its traditional networking markets and rivals. Driven by the need to maintain brisk growth and high margins, Cisco is being pushed out of its network-layer comfort zone and into the upper reaches of protocol stack.

Cisco is a formidable industry player, and it might well succeed in its effort to become a leading purveyor of unified-communications software and other applications. However, there’s also a risk that Cisco might not make the transition smoothly, and that it will lose focus on its core markets as it tries to capture new ones further up the stack.

Gartner Group delivered a similar admonition recently when it issued its Magic Quadrant for Campus LAN (Global) 2006 report.

While the report positioned Cisco in a leadership position on the quadrant graphic, the text of the report was critical of Cisco’s attentiveness to customer requirements and of the increasingly closed nature of its network architecture, which favors Cisco’s VoIP IP PBX and other communication solutions over those offered by other vendors.

Private-Equity Bids Upped for 3Com-Huawei Joint Venture

The Wall Street Journal reports that private-equity offers to acquire the entirety of the H-3C joint venture between 3Com Corporation and China’s telecommunications-equipment powerhouse Huawei Technologies now have reached $1.5-billion to $2 billion.

According to WSJ’s sources, one of the original bidders, Texas Pacific Group, has dropped out of the competition for H-3C. That leaves Silver Lake Partners and Bain Capital Inc. still in the running, with Bain now offering the higher bid.

3Com currently owns 51 percent of the Hong Kong-based joint venture, which manufactures routers and switches and sells networking equipment made by 3Com in China and Japan. 3Com would like to buy out the balance of H-3C that it doesn’t own, but Huawei has other ideas, as the following excerpt from the WSJ story makes evident.

"Huawei’s plan is to buy out 3Com and sell the whole of the venture to a private equity firm, taking part of the payment in cash, and part of the payment in shares of a newly set-up holding company," said one person.

3Com, realizing that it doesn’t have the resources on its own to compete against the financial heft of Silver Lake or Bain, apparently has begun discussions with other private-equity firms in a bid to seek financial backing for its plan to take total control of the joint venture.

H-3C is 3Com’s greatest corporate asset, and it will do everything possible to retain and increase its stake. It’s up against daunting competition, however, and it will need help to come through with a winning bid.

The WSJ reports that people close to the deal said they expect the sale of the venture to close by year-end and, given the involvement of private-equity firms, it would likely be a leveraged buyout.

Sony Laptop-Batttery Debacle Goes from Bad to Worse

Just when Sony thought its problems with its defective laptop batteries couldn’t get any worse — with wave upon wave of product recalls hitting in seemingly endless succession — a report from Japan indicates that a Sony-made battery in a Fujitsu laptop overheated and gave off sparks, leaving the computer’s user with minor-burn injuries. 

I don’t know much about the litigiousness of Japanese society, but Sony should be glad that this sort of thing didn’t happen in the USA. It would have been an instant lawsuit.

Riverbed Delivers Stellar Results, Reinforces WAN-Optimization Leadership Status

In its first quarterly results as a public company, Riverbed Technology exceeded analyst expectations and fortified its already strong credentials as a leading vendor in the fast-growing WAN-optimization marketplace.

Revenue for the September quarter was $24.6 million, up 36% sequentially and 247% over results in the corresponding quarter last year. The consensus revenue estimate of analysts was set at $21.4 million. The company recorded an earnings-per-share loss of 2 cents versus cents in the preceding quarter and eight cents in the corresponding quarter last year. Again, the company beat analysts’ expectations, which were pegged at a loss of four cents per share.

Riverbed’s results won plaudits from pleasantly surprised analysts, who noted that the company is taking a leadership position in delivering WAN-optimization solutions for enterprises.

JMP Securities’ Samuel Wilson was among those impressed at Riverbed’s quarterly performance and its future prospects. Noted Wilson:

Riverbed is the darling of the WAN Optimization market both in terms of product and mindshare. . . .The company’s growth opportunities are significant, leading to potential for upside earnings surprises from the company.

On the basis of Riverbed’s results, the company appears to be taking share from its most its WAN-optimization rivals, including Packeteer, F5, and Citrix.

WiMAX: A Telco Technology in Internet Garb

In a recent column for InfoWorld, Ephraim Schwartz explains why carriers such as Sprint and Clearwire are promoting WiMAX so aggressively.

As it turns out, the carriers aren’t simply enamored of WiMAX’s potential range, throughput, and compatibility with existing IP-based infrastructure and management systems.

There’s another reason, and Schwartz distills it in this quote from Juan Santiago, senior director of product and strategy at Motorola:

WiMAX is a licensed spectrum. It is a service provider who will provide it. You can’t provide it yourself.

In other words, it’s not like WiFi, which runs on unlicensed spectrum and can be bought and installed by consumers and enterprises for use in homes, businesses, and nearly anywhere else.

Quoting Schwartz on WiMAX:

As a licensed spectrum, that must mean someone had to pay for it. Why, that could mean they might make me pay for it — by the minute, the hour, the megabyte? What do you think?

“But,” you might say, “prices will fall as WiMAX network providers face competition.” What competition? It looks like a closed club to me.

According to research from telecom analysis firm Maravedis, Sprint and Clearwire own the lion’s share of the spectrum allocated for WiMAX. Sprint owns 268 protected service areas and Clearwire owns 59. BellSouth is third with 36. Meanwhile Motorola, the equipment supplier to both, just bought Clearwire’s equipment manufacturer and Clearwire subsidiary NextNet.

Schwartz also points out that, even though Intel plans to put dual WiFi/WiMAX chip sets into millions of notebooks PCs, the radios cannot operating simultaneously.

All of which explains, says Schwartz, why WiMAX advocates are arguing that WiFi will only be suitable for use in the home. Motorola’s Santiago and others say because Wi-Fi is free or unlicensed, it is subject ot interference. They also contend that Metro Wi-Fi doesn’t make sense, because it takes too many access points to deploy across a city.

There might be some truth to what Santiago and other WiMAX proponents say, but does WiMAX — a closed, telco-controlled wireless access network — represent a better alternative for consumers and businesses? I don’t think so.

As for Schwartz, he closes his column as follows:

End-users and corporate users may not have much say in how this plays out in the end, but sometimes doing business is like defending democracy: An informed citizenry is the best defense.

Intel Closing Cambridge Research Lab

InfoWorld reports that Intel will close its research laboratory in Cambridge, England, before the end of this year.

It’s yet another sign that Intel’s focus and resources are being placed practical, tactical, near-term objectives, such as revenue realization and profitability, rather than on long-term strategic research initiatives.

The Cambridge lab is one of four that Intel runs in collaboration with universities to work on long-term projects, and the only such facility outside the U.S. Researchers in Cambridge worked on wireless and optical-networking projects and on technology related to distributed applications.

Intel’s three other university labs are at the University of California at Berkeley, Carnegie Mellon University in Pittsburgh, and the University of Washington in Seattle. It is not known whether any of those research facilities are in danger of being shut down as part of Intel’s cost-cutting and restructuring zeal.

Given Intel’s struggles in recent years and its suddenly heated competitive battle against AMD in the microprocessor market, it is understandable that the company would want to get its business priorities in order.

Still, Intel has to be careful not to go too far in cutting back on forward-looking research initiatives. Some of those projects might have the potential to give Intel technologies that would help it regain a competitive edge against AMD.