Tech Industry

Nortel seeks revival through 'hyperconnectivity'

CEO Mike Zafirovski is confident that the "megatrend" can propel the networking giant back to the forefront of the industry.

"Anything that can be connected will be connected."

That's the essence of "hyperconnectivity," a term Nortel Networks has been trumpeting since the spring and that looms large over most developments at the communications equipment giant.

Since becoming chief executive of the company in November of 2005, Mike Zafirovski has been concentrating on a revival at the Canadian vendor, after years in which it experienced a slump in sales, large-scale layoffs and several episodes of restating financial results.

The revival of Nortel is taking place based on still-strong spending on research and development; a well-documented partnership with Microsoft for unified communications; and some notable contract wins, such as at the Department for Work and Pensions in the U.K. (through another big partner, BT) and Royal Dutch Shell, the first major unified-communications customer of note.

Mike Zafirovski Mike Zafirovski

But the trend it calls hyperconnectivity--Zafirovski and associates actually refer to it as a "megatrend"--gives more reason for optimism at a company that, by the admission of its own executive team, was only a few years ago able to offer "me too" products.

Zafirovski cites research from an academic at the Massachusetts Institute of Technology that forecasts more than a trillion nodes connected online over the next 15 years. "There is an opportunity for true mobile broadband," he said. "And there is a chance to completely redefine applications."

And that, the company reckons, means more opportunity. "Hundreds of doors are being opened that weren't before," Zafirovski added.

There are question marks over how bullish any communications vendor should be, given the horizon for such change and the short-term outlook of financial markets, and there are those who even point to the term "hyperconnectivity" as nothing novel.

But Zafirovski said, "Nortel is not driving this. This is going to happen."

In 2006, Nortel spent the equivalent of 18 percent of its revenues on R&D--a figure the company says was at the top end of communications equipment makers and should be slightly lower, at about 15 percent. It also spent too much of its time on legacy products and not enough on new products--a "recipe for disaster," in Zafirovski's words.

But the chief executive--still not even halfway into his three- to five-year plan to get the company at the front of the industry again--is confident. "This is a company coming back, leapfrogging competition, driving real innovation for customers," he said.

Two of the biggest competitors keen not to let Nortel make much headway are networking giant Cisco Systems and rapidly rising Chinese company Huawei Technologies.

Asked about Cisco's reputation as the undisputed leader in the sector and Huawei's rapid rise, with its traditionally low prices, Zafirovski said he welcomes the fight and would always sell on "quality, reliability and price."

Tony Hallett of reported from London.