Nortel partners not pleased

Nortel Networks was short a couple of valentines this month, as two of its equipment vendor partners singled out the company as a disappointment in quarterly earnings calls.

Last week, struggling core router vendor Avici Systems blamed Nortel for much of its woes. Forced to dramatically restructure its operations to survive, Avici attributed its poor top-line growth partly to a distribution partnership it forged with Nortel in early 2004 that simply wasn't working. Avici accused its big brother of focusing more attention on wireless markets than wireline ones, a suggestion Nortel denies.

Two weeks earlier, in another earnings call, ECI Telecom announced that it was scuttling its partnership with Nortel after the latter failed to make a dent in the North American market for its broadband gear. Walt Megura, general manager of Nortel's broadband networks group, said ECI's gear was better-suited to the shorter access loops of the European market and didn't work well in the U.S., where carriers wanted remote cabinet applications and multiservice platforms. Nortel hoped to combine ECI's gear with its own to offer a comprehensive solution with an attractive total cost of ownership. But carriers didn't buy it.

“We were trying to focus on a couple of the big [carriers],” Megura said. “But the operational costs of swapping the vendors and the volumes you drive didn't make sense.”

One Nortel access partner that isn't complaining is Calix, which claims to have won 18 customers alongside Nortel since signing a three-year partnership with it two years ago, including a big two-year deal with Sprint, aka Embark. However, Calix will soon become more foe than friend. Nortel picked Huawei Technologies as its Gigabit passive optical networking (GPON) partner this month, putting it in direct competition with Calix, which last November announced its acquisition of Optical Solutions, a leader in GPON. Although Nortel insists the Calix partnership is still intact, Kevin Walsh, Calix's vice president of marketing, concedes the relationship will probably “change” next year. But that would have happened anyway, he said, as Calix, now with 350 employees, outgrows the need for a big-brother partner. In fact, Walsh added, vendors shouldn't rely too much on partners in the first place.

“I was surprised ECI went on a rant,” Walsh said. “You only get out of these partnerships what you put into them. You've got to work together.”