Vulturine Vendors Circle Over Nortel Partners, Customers

Sensing a business opportunity and smelling blood in the water, several networking vendors have swooped down in an attempt to poach away Nortel Networks' partners and customers as the Toronto-based company fights its way through Chapter 11 bankruptcy protection.

The potential downfall of a rival has brought several companies out of the fold, offering big-dollar buyback rebates on Nortel equipment, trade-up programs and offering Nortel channel partners who jump ship added incentives and revenue options.

The feeding frenzy comes after Nortel last week filed for Chapter 11 bankruptcy protection, the result of years of dwindling sales and financial woes. Nortel's time line from 2000 to 2009 reads more like a how-not-to manual than a how-to. The bankruptcy filing, many vendors contend, is just another nail in Nortel's coffin as the vendor prepares for a slow demise. In November, Nortel posted $3.4 billion in losses for the third calendar quarter -- its largest quarterly loss in seven years -- and announced plans to slash more than 1,000 jobs, freeze salaries, halt hiring and review its real estate holdings.

"Nortel must be put on a sound financial footing once and for all," said Nortel CEO Mike Zafirovski in a statement following the Chapter 11 filing. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be."

But in an industry where one company's downfall is another's payday, Nortel's competition has been quick to jump at the chance to court Nortel customers and channel partners questioning the future of their relationships with the cash-strapped telecom giant.

"The timing is not a coincidence, obviously," said Dean Darwin, vice president of North American channels for F5. "In these times, it's an interesting dynamic at work. Customers are asking: 'Do I invest in a Nortel product to replace this?'"

Seattle-based F5 has unveiled an aggressive buyback program for Nortel Alteon application switches, giving customers questioning Nortel's future an easy out. The program offers increased trade-in credits toward replacement of Alteon gear and customized consulting services to simplify the migration from Alteon systems to F5's BIG-IP Application Delivery Controllers.

According to Darwin, Alteon customers can trade in select Nortel Alteon products to purchase an F5 BIG-IP solution and get up to $9,000 in trade-in credits.

For F5 partners, Darwin said, the buyback program can lead to at-bats. Solution providers can engage nervous Nortel users and offer them a market-leading product with a strong ROI story as a replacement for gear that could have a rocky future. A BIG-IP solution, Darwin said, can give Nortel customers the ability to collapse several boxes into one and use a compelling event -- Nortel's bankruptcy filing -- to get a foot in the door.

"Alteon boxes from a trade-in perspective are worthless," Darwin said, adding that there is no real gray market value for them, so up to $9,000 in trade-in credits is not chump change.

"It is an optimum, compelling event for partners to attack the customer with a strong ROI story," Darwin said. "We're trying to create an at-bat from that compelling event for channel partners."

Darwin said to take advantage of the credits, F5 partners need to register a deal and plug details into the trade-in calculator. Once the deal registration is approved, the credits are a go.

And F5 isn't the only one preying on Nortel customers' fears. Open- source networking vendor Vyatta has vowed to help Nortel customers through the uncertainty. To entice worried Nortel customers, Vyatta has extended its "Do It For The First Time With Vyatta" promotion, which was created in late 2008 to help put Vyatta in front of new customers. The promotion gives first-time Vyatta customers a 20 percent discount on their first order.

On his blog, Vyatta vice president of strategy Dave Roberts wrote that the recession and Nortel's subsequent bankruptcy filing will change the way people view the network, opening the doors for alternative vendors, like Vyatta, that have been growing consistently.

NEXT: Are partners, customers biting?