You said in your keynote that Nortel is gaining back growth in the enterprise. How far did Nortel fall and where is it now in climbing back to become a significant challenger to Cisco?
Weve been flat or losing market share for four or five years, minimum, in the enterprise space. I think that stopped and started going the other way in the third quarter of last year. Right now this is a food fight for whos No.2 [in the enterprise networking market]. Theres no clear No. 2 right now.
You said in your keynote that Nortels enterprise networking revenue grew 34 percent over the last year. What qualitative proof points demonstrate Nortels growth there?
[Nortel won deals with] Rolls-Royce, Shell Oil, the Louisiana Superdome. Verizon and [British Telecom] are large partners. We had a nice win with Wal-Mart last year. Kodak just signed in a significant way, and were growing again with FedEx.
We created within Nortel a business transformation project with 200 people working full-time on it. We looked at how many sales people we had, how much theyre covering, and were able to serve global customers by region, what our track record for new product introductions was, whether our direct versus indirect sales mix was appropriate, whether our R&D [funding] was appropriate.
Late in the second quarter we increased R&D spending from $300 [million] to $400 million a year, increased the sales force, [and] we created a global account structure. Steve Slattery, who became president of our enterprise unit, has a terrific track record of meeting due dates. Hes producing benefits.
Were working with systems integrators in a more comprehensive approach. We made it simpler for SMBs [small and midsize businesses] to upgrade from a PBX to VOIP [voice over IP] through our IPT 1-2-3 program [launched] last July. And [the Microsoft Innovative Communications Alliance] opened doors for us in a profound way.
Each of those is material in its own way. We are doing a better job with legacy customers and are being more forthright in telling customers what we believe is good for them. And now the new marketing campaign kicked off last week.
Some believe that Nortel, in its relationship with Microsoft, has given away precious intellectual property on a bet that Nortel can grow to become a significant services provider. Whats your response to that?