Nortel Networks Corp. is hoping to fill a gap in its enterprise router product range with the purchase of Tasman Networks Inc., as the company tries to nibble away at the massive market share held by Cisco Systems Inc.
Nortel will pay US$99.5 million for Tasman after scouting for a converged network router suitable for small- and medium-sized enterprise branch offices and distributed remote sites.
The acquisition reaffirms Nortel’s commitment to the enterprise market and gives the PBX leader an answer to Cisco’s Integrated Services Router (ISR) line, says Ronald Gruia, program leader, emerging communications, for Toronto-based Frost & Sullivan Inc.
“Nortel has confirmed that new CEO Michael Zafirovski will remain committed to the enterprise,” he says.
“Bill Owens, Zafirovski’s predecessor, kept saying that Nortel would remain committed to the enterprise business. But there had been some speculation about divestiture in the enterprise division, especially after Mike Zafirovski was named as CEO, given his previous background in wireless.”
The acquisition has ended that speculation and dispelled any rumours of Toronto-based Nortel disinvesting in its enterprise division, says Gruia. “It shows that the enterprise will remain a division among the other divisions that are kept by Nortel.”
The deal was targeted by Atul Bhatnager, vice-president and general manager for Nortel’s enterprise data network division, based in Santa Clara, Calif.
Bhatnager says Tasman was chosen for its lower-cost, standards-based WAN (wide area network) routers that can handle voice, video and data.
“Tasman’s routers are superior in running voice and real-time traffic. We didn’t have a convergence-ready routing platform for branch offices and this really plugged a key module that we needed in our line-up,” he says.
According to Bhatnager, Nortel now has a complete end-to-end offering in its converged data networks for enterprises. “This was the only gap, and we have filled that.”
Tasman’s IP routers will form Nortel’s new Secure Router line of convergence products. The hardware aim at small and medium deployments of voice over IP and virtual private networks, with reliable quality of service and secure firewalls built in.
Gruia says Tasman’s Secure Router 3120 and 1000 Series will strengthen Nortel’s product offering and give the company an alternative to Cisco’s ISR strategy. Cisco’s 1800, 2600 and 3800 Series were launched in 2004 and set the industry standard for connecting branch offices and remote sites.
Gruia describes Tasman’s flagship 3120 as an enterprise branch router with built-in VPN functionality, but he is sceptical of the hardware’s aptitude for VoIP. “The 3120 doesn’t have any sophisticated IP PBX features embedded in it to support VoIP, which is the case in the Cisco ISR.”
Gruia says the ISR routers have so much built-in functionality that they can almost replace Cisco’s CallManager switching software in a remote location.
Nortel’s idea is to integrate its Call Control IP PBX into the Tasman 3120 and then position the box in defence against the ISR, says Gruia, who estimates Cisco’s market share at 90 per cent and Nortel’s at three per cent. “The ISR has given Cisco a big competitive advantage,”
While the Tasman routers will improve Nortel’s competitive position in the enterprise routing space, Gruia does not believe this was the driving logic behind the acquisition.
“The main reason is for Nortel to defend its install base as it migrates to PPP (Point-to-Point Protocol) PBX, and to have an answer to Cisco’s ISR,” he says.
“When Cisco has been doing these rip-and-replace upgrades to legacy infrastructures, the company has been aggressively pushing its assets for multi-branch offices, and Nortel didn’t have an answer.”
Headquartered in San Jose, Calif., Tasman competes with Cisco and Juniper Networks Inc., but has a lower profile as it plays in the carrier market. Most of the firm’s products are rebranded as part of a managed service for network connectivity.
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