What Nortel’s Demise Means for Microsoft

We’ve all read A LOT about the disintegration, implosion, demise, or whatever else you want to call it, of the once great and mighty Nortel. Most of the articles and posts deal with either a) how this could happen, or b) who was going to now buy up all the piece parts. One question that I haven’t seen addressed, is what Nortel’s demise means for Microsoft.

Rewind to July 2006, just three years ago. Microsoft CEO, Steve Balmer, and Nortel CEO, Mike Zafirovski, stand together grinning from ear to ear about the partnership they had just forged. And Zafirovski is quoted as saying that the deal will generate $1 billion in new revenue through 2009. Clearly the results were a whole lot of zeros short of that prediction.

Let’s start with why they inked the deal in the first place. Nortel was in trouble and looked to Microsoft to help save them. Microsoft wanted into the burgeoning market of unified communications and needed a big name communications company to help it make a splash. Microsoft also needed some technical talent that knew something about IP telephony. With those objectives, Microsoft got just what it needed and Nortel got squat.

Seriously, I think the folks in Redmond think this all worked out okay for them. Nortel gave Microsoft the credibility and knowledge they needed to enter the IP communications game. So what happens next?

The main benefits of the relationship to Microsoft are in the past. Microsoft will easily move on. They successfully made their entrance into the UC game (thanks at least in part to Nortel). They will most likely hire several of the talented engineers that Nortel had developed over the years. And then the next chapter’s results will be determined based on who buys Nortel’s enterprise business. If it is Avaya, I predict a quick end to the Microsoft partnership and an up-the-ante feud between the two companies. If it turns out to be Siemens, maybe the dance continues. What does the disintegrated alliance mean for customers? Not much. At the end of the day Microsoft will keep enhancing OCS, release new IP phone devices, tout their UC wins, and keep that mighty marketing machine running.

What do you think? Any other insight into the Microsoft-Nortel relationship and what happens next?

Joe Staples — blogging and winning business while the giants bicker.