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Heavy hitters join for telephony alliance

Nortel Networks, Hewlett-Packard, Intel, and Microsoft team up to announce new technologies designed to carry telephony, data, and Internet traffic for businesses.

SAN JOSE, California--A group of PC and communications heavyweights unveiled new technologies designed to carry voice, data, and Internet traffic for businesses.

As reported earlier by CNET News.com, Microsoft, Intel, Hewlett-Packard, and Nortel Networks, announced the new initiative today at the Technology Museum of Innovation in San Jose.

The alliance between the three PC giants and the high-end telecom equipment provider aims to bring voice networks to a wider array of customers through the use of technologies like Intel-based hardware and Microsoft's Windows operating system.

"Each of us has parts of the solution customers are looking for," said John Roth, chief executive at Nortel. "This is about unified solutions for the masses."

As part of the alliance, HP will offer two products that integrate voice and data.

An all-in-one business communications server, built with Nortel's IP capabilities, Intel architecture, and Microsoft's Windows NT server, will offer full telephone system features, including voice mail, call center, and Internet telephony. It is geared toward small to medium-sized businesses and will ship in mid-1999.

"We have a strong industry focus on telecom," said Lewis Platt, chairman and chief executive of HP.

Another product, a business messaging server--which offers unified messaging, or the ability to check voice mail, email, pages and fax through a single device--will also ship in mid-1999. The server will use Nortel Networks' new CallPilot messaging technology, allowing users to unify email messages with email software, such as Lotus Notes or Microsoft Exchange and Outlook.

Nortel and Microsoft are working together to integrate the Windows operating system into the telco's enterprise communications product lines. The companies also plan to open two centers in Santa Clara, California, and Brampton, Ontario, to develop and test new products.

Intel is providing Nortel Networks with processors for its Meridian 1 communications systems and server-based telephony applications.

Platt, Roth, and Intel chief executive Craig Barrett were present at the event. Microsoft's Bill Gates appeared via live broadcast.

The move marks an increased effort by the companies to snag a larger portion of the lucrative telecommunications equipment market.

Intel and Microsoft may own the desktop but now the "Wintel" partners want a piece of the growing communications industry.

Market research firm International Data Corporation pegs the U.S. telecommunications market--including local and long distance voice, wireless, and data services--as a $261.9 billion market this year. Separately, the worldwide telecommunications equipment market is expected to total $250 billion in 2000, according to investment bank Salomon Smith Barney.

As consumer PC prices continue to fall, the PC industry leaders would like to get into as many new markets as possible--especially the booming telecommunications industry where voice, video, and data lines are blurring, alliances are being struck, and new networks are being built on a daily basis.

"Intel is clearly looking to get into new markets, and I think telecom is certainly one," said Kelly Spang, a semiconductor analyst at Technology Business Research.

A closer relationship
Until recently Nortel has been using more expensive proprietary systems in its communications products--frequently Motorola chips, according to a Nortel spokesman.

Last week Nortel announced that it will broaden its use of Intel's chips in its call center systems, which are automated systems that route calls to the appropriate person.

Intel's new Pentium III chip was made with multimedia capabilities in mind, and voice recognition is one of the chip's better tricks.

In the past, the Canadian company used proprietary chips for its Symposium Call Center Server, CallPilot unified messaging, and Symposium OPEN IVR (Interactive Voice Response) systems, but is now using Intel chips. The company also announced that other products would debut with Intel chips later this year.

Intel hopes to prove its chips are a lower-cost, reliable alternative for high-volume businesses.

Spang said Intel has made strides in its networking business and the acquisitions of Shiva and Level One continues the company's drive toward the data and telecommunications industries.

"There's sort of a parallel push by Intel to get more into voice recognition, telecom, basically more applications that eat network bandwidth and that require more processing power, hence the Pentium III," she said.

Cutting into Unix
But the "Wintel" alliance, long the dominant platform on the consumer desktop and in small to mid-sized business settings, has had difficulty penetrating higher profit margin markets such as telecommunications. By joining together, Intel and Microsoft hope to steal market share from the Unix vendors.

"They've had a very difficult time getting into the telecommunications industry," said Amir Ahari, a senior analyst who covers servers at IDC. "The telecos have been a dominant Unix house."

Many telecommunications companies have huge investments in Unix-based systems and some have fears about the scalability and robustness of the Windows NT-Intel chip offering for heavy-duty, or "mission critical" applications.

"Now they have a telco supplier entering the fray. In the past you wouldn't have seen that," Ahari said. "I think they're trying to prove that NT and Intel is capable of scaling and handling a heavy volume business like the telecommunications industry."

News.com's Ben Heskett and Wylie Wong contributed to this report.