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Long Time Nortel Distributor Now an Avaya Business Partner

Tony Parella, President and CEO, Shared Technologies Inc., posted a message on his company's website on January 15, 2009, about the Nortel Chapter 11 bankruptcy filing. He said that it had "been known for some time that Nortel was experiencing financial trouble," but also that "there is absolutely no chance that Nortel will not exit post Chapter 11." Shared Technologies has been a very long time distributor of Nortel product and solutions and is an Elite Advantage Partner of the system supplier. Although the distributor "plan(s) to continue the [Nortel] relationship in the years to come," less than one week after the posting, a press release was issued announcing that Shared Technologies joined the Avaya BusinessPartner program.It is obvious that the Shared Technologies decision to distribute and support Avaya's communications offerings did not commence with Nortel's bankruptcy filing, but the Chapter 11 announcement fully justified the distributor's decision to alleviate some of its dependence on Nortel.

Adding another system supplier's offerings to its portfolio was a major decision for the distributor, because it was also carrying product from NEC and Mitel as well as AVST. Shared Technologies is also a certified partner of both Microsoft and Tandberg. Partnering with Avaya certainly added more diversity to the Shared Technologies portfolio, but the strong overlap with Nortel offerings only made sense if its faith in Nortel's future viability was wavering (despite its January 15, 2009 posting).

Joining with Avaya is a very expensive decision for Shared Technologies in consideration of new and additional sales/installation training, inventory, and other cost factors. Considering that Avaya has an extensive product and application solutions portfolio, the costs to a distributor the size of Shared Technologies (a staff of 1,300 professionals) can be substantial.

It is no secret that Avaya and its fellow competitors are looking to take advantage of Nortel's financial problems. The Shared Technologies announcement may be the first of many stating that a long time Nortel partner will now be distributing and supporting product/solutions from a Nortel competitor. The distributor must continue to show support for Nortel, because of the installed customer base, but behind the scenes things are probably much different. Nortel's customer base is also vulnerable, especially accounts who are ready to update an installed system or purchase new product. Nortel may, as Parella states, emerge from Chapter 11 in strong shape, but there is no guarantee.

During the past few years I have assumed that Nortel's market share decline was due in no small part to many of its major distributors, such as AT&T, Verizon, and Black Box, ramping up marketing and sales efforts for Cisco product at the expense of Nortel. Nortel has relied almost exclusively on third parties for its distribution sales strategy, and though highly successful for a long period of time, it now appears to be an albatross, because dealers are more apt than ever to propose a non-Nortel solution to potential customers based on the supplier's current financial situation. Nortel has been operating under gray clouds for several years, dating to the financial scandals of the Dunn era, but now the clouds are black and the risk factor highly elevated.

Nortel has played the Chapter 11 filing very close to its vest. Although it held a conference call with Joel Hackney, President, Enterprise Solutions, last week for its customers to assure them that things were not as bad as they appeared and to have faith in the company, there has been little contact with and information flow to the consultant and analyst communities I am a part of. I recognize that Nortel is constrained in what it can and cannot say while under Chapter 11 regulations, but no communications at all is less than acceptable at this time. The situation is not going to disappear and speculation can run rampant unless Nortel's public relation efforts improve. As I often state, the Nortel of today is not the Nortel of 15-20 years ago. Its marketing and promotional capabilities have declined significantly (in addition to its financial health). I'm sure the Nortel situation will be a major topic of conversation at VoiceCon in two months' time. I hope that in the interim they will reach out more to the influencers who help determine their fate.