Indirect channel partners at Ciena Corp. (CIEN) and Nortel Networks are in a good place now that the two companies have joined forces. More end users, from service providers to enterprises, are counting on their consultants and suppliers to know not just old-school TDM technologies, but also the next-gen IP world. Ciena says it’s perfectly positioned as one of those vendors, now that it’s taken over bankrupt Nortel’s Metro Ethernet Networks (MEN) unit.
Resellers and integrators can count on “a much broader tool kit, and a much bigger organization to do business with,” said Dave Parks, Ciena’s director of product marketing, in an interview on Friday. Besides that, he added, the combination of Ciena and Nortel translates into a “stronger brand.” Parks didn’t have information on any changes in commissions or incentives, however, since Ciena still is unveiling details of the MEN takeover.
On March 19, Ciena closed the $773.8 million acquisition of Nortel’s optical division. Ciena won the assets at a heated auction in late November, squeezing out rival Nokia Siemens Networks for the rights to products, intellectual property and employees. Most industry experts agreed Ciena was the best fit for the Nortel holdings, but many also worried Ciena had taken on too much execution risk amid what one financial analyst called “uneven opex discipline.” Ciena is acknowledging those concerns, without giving them too much weight. The key to this historic deal, the Maryland-based manufacturer says, is that resellers and other indirect partners have a doubled-in-size partner as communications traffic becomes all-IP.
“Ciena is the market leader in core switching and Nortel is the market leader in metro optical and long-haul, so we’ve brought that together,” Parks said. “That’s giving our customers the ability to buy … integrated capabilities.”
To that point, Ciena has grouped its products and Nortel’s into five categories: packet-optical transport; packet-optical switching; carrier Ethernet service delivery; software; and services. Ciena has not “end-of-lifed anything” as part of the transaction, Parks said, which means the company will continue to support the Nortel equipment that Nortel itself has not discontinued. In fact, Ciena’s main internal concern is R&D, Parks said.
“All we’ve done is prioritized our R&D investments, and if you look at where we prioritized, it makes sense because networks are moving to more higher-capacity, packet-optimized infrastructure,” he said. Ciena wants to provide operators and businesses with fewer devices that handle more bandwidth, Parks explained, “so we’re very focused on things like 100G…and automating the network to enable faster time to market, reduce manual intervention and help take down operational costs.”
Even as it makes headway on the product side, Ciena continues to work to ease misgivings about its ability to manage a Nortel integration.
First up, perceptions of the tarnished Nortel brand.
“We’ve talked to a lot of customers about their feelings on this and almost all the feedback is very positive going forward,” Parks said. “There’s always going to be somebody who disagrees with a certain aspect of something.”
Perhaps what’s most interesting is the findings of the “perception studies” Ciena conducted in the months between the auction win and the deal’s close to gauge users’ views of Ciena and Nortel. Without fail, Nortel ranked high on inventiveness, Parks said.
“The MEN group has always been able to deliver some really impressive innovation, even through some tough times, and that resonates with customers,” he said. “They’ve been able to deliver on 100G even under financial constraints. So with those assets now becoming part of Ciena, customers view that as really positive.”
At the same time, Ciena knows it has to confront some fears on Wall Street, too. Parks couldn’t say much about Ciena’s plans for handling what a Barclays Capital analyst recently called the “high execution risk” and “uneven open discipline.” However, Parks said, Ciena will be “tackling a lot of that stuff head-on” at its analyst conference in April.
“But we have done a lot already in terms of making sure the right leadership is in place … and by prioritizing our R&D investment,” he said. “A lot of companies would not have done that at this stage. A lot of times with an acquisition of this kind of scale … it takes six to 12 months, even more, to rationalize the investments and understand where opex is going to be placed.”
The key with this buyout was that speed was of the essence, Parks said – there could be no disruption to business or customers.
To help that happen, Ciena appointed Philippe Morin, who ran MEN, as head of the products division.
“He’s got a very, very important position in the company,” Parks said. That’s because Morin oversees R&D, product management, supply chain duties and marketing.
Parks said there are “a number of other Nortel MEN executives in very high-level” positions throughout Ciena, and more details there will come to light “as the organization starts to become more public and unfold,” he said.
So far we do know that Pavi Binning, who was juggling three titles at Nortel – chief restructuring officer, CFO and executive vice president – resigned on Sunday. John Doolittle, who worked at Nortel for almost 20 years, took over as Nortel’s CFO on Monday.
Despite the challenges it faces, Ciena is basking in global presence it now boasts – it’s doing business with 800 customers in 60 countries. The company already operated an R&D campus in Ottawa, Canada, but it also gets Nortel’s facilities there as well as in the Asia Pacific, Caribbean and Latin America regions. And Ciena has bolstered its footprint in Europe, the Middle East and Africa, thanks to the Nortel deal.
And when it comes to integrating people, not just processes, Parks said employees are doing well.
“There’s a lot of collaboration and cross-functional interaction,” he said. “Both companies come from similar backgrounds. Sure, Nortel is a hundred-plus years old, but we’re both focused on similar technologies and market segments…That makes things a lot easier.”
One of the best parts, Parks said, is Ciena has accelerated its strategy by two or three years.
“We’re not so small that we can’t execute and not too general that we can’t be fast and flexible and very proactive to our customers’ needs,” he said. “That’s a really good spot to be in right now.”
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