Under normal circumstances, the introduction of a new switching technology that advances data center capabilities at a very attractive price point would be welcome news. But the issues surrounding Nortel are anything but normal.
The new Ethernet Routing Switch (ERS) 5600 is a stackable model with 10 GbE uplink capability that the company is pitching as its solution for unified communications networking. The line is available in five versions ranging from a 24-port 1000BASE-X model to a 96-port 10/100/1000BASE-T with six combo SFP ports and two XFP ports. Pricing ranges from about $8,000 to $20,000, depending on configuration. Company officials claim the line provides 18 to 20 times the performance of comparable switches on the market, which many take as a direct reference to Cisco.
While it's admirable that Nortel is approaching the enterprise switch market with such gusto, I can't help but view the move in light of the company's ongoing financial difficulty. Any prospective customer should rightly wonder whether Nortel will be around much longer to support its enterprise products.
It's no secret that the company has put up its Metro Ethernet Networks (MEN) division for sale, mainly to generate cash for its enterprise and other carrier-class businesses. The fact that nearly five months have gone by with the division formally on the block but still no takers has some people wondering if Nortel will be able to pull itself out of the hole it's in. And this despite the fact that Nortel continues to cut new ground in advanced optical networking technologies like 100 GbE traffic paired with 100G wavelength systems.
Among the primary contenders for MEN are Cisco, China's Huawei, Ericsson and Nokia Siemens. So far, though, only tiny Israeli firm Radware has put any money on the table, and the paltry $50 million that it's offering is laughable considering the entire unit is estimated to be worth upwards of $2 billion, even with devaluation due to the current world financial mess. That kind of money will buy one, maybe two, smaller product lines.
And at least one major firm, Huawei, does not appear to be a strong player anymore. China Business News recently quoted senior vice president Xu Zhijun as saying the company is unlikely to buy the unit, considering they just sold off its own Ethernet business last year. It seems the company is more interested in extending its stake in mobile technology instead.
In the end, it's very likely that MEN will get sold to someone at some price, but the question is whether that sale will come in time to rescue the company from bankruptcy, after which the asking price is sure to go down. And if Nortel files the Canadian equivalent of Chapter 11 (and there is still talk of a government bailout, mind you), where will that leave enterprise customers looking to integrate their new ERS 5600s?