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."

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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?

"While the future is never certain, Vyatta won't be filing Chapter 11 ourselves this week," Roberts wrote.

And in a tongue-in-cheek press release, Vyatta also claimed to be partially responsible for Nortel's decline, calling Nortel the "first proprietary victim" of open networking.

Extreme Networks also recently launched a new Nortel Trade Up program, which lets Nortel partners join Extreme's channel program at a comparable partner level for a six-month grace period. If a higher level Nortel partner wants to jump to Extreme, that partner will be accepted into the program at the highest partner level Extreme offers -- Diamond Elite.

"As economic challenges are leading businesses to demand alternate choices for their networks, it's time to be Extreme. If you qualify and join the Extreme Networks Channel Partner Program, your initial level for the first six months will be assigned at the corresponding partner status in the Nortel Networks Channel Partner Program. Making it through tough times doesn't get easier," Extreme wrote in materials advertising the Nortel Trade Up Program.

Similar to Extreme, Juniper Networks is also wooing shaky Nortel partners. Juniper launched its Nortel partner initiative in December, before Nortel filed for bankruptcy, and it is likely to gain more traction now that Nortel's future has been called into question.

In a Dec. 1 letter to Nortel Partners, Juniper's senior vice president of worldwide channels, Frank Vitagliano, wrote: "At Juniper Networks, we understand it can be challenging to navigate the current business landscape while continuing to add value to your customers. In today's troubled climate, you may have concerns about your continued ability to provide high-performance networking solutions to your customers. We want to help."

Vitagliano, at the time, said Juniper was using Nortel's struggles as an opportunity to tell new and existing partners that Juniper plans to invest across the board in the channel and that it believes partners can and will survive the economic slowdown.

For partners who make the jump from Nortel to Juniper, Vitagliano said Juniper will offer training and enablement offerings, Fast Track certification programs, Webinars, demo kits and a Juniper conversion kit to get them up to speed quickly and cost-efficiently. Juniper is also offering defecting Nortel partners a set of financial incentives.

"This isn't just about targeting new partners and different partners," Vitagliano said at the time. "It's an overall plan to invest in programs and offerings and more resources."

Juniper said this week that there has been a lot of interest in the new program and since the Dec. 1 letter, Juniper has welcomed 10 new partners to its arsenal. The initiative also generated a pipeline of interested channel partners, which Juniper is now engaging. Overall, Juniper noted, that interest is building and its channel organization is now in the field talking with partners.

And while the programs may be enticing to Nortel partners, not all are sold on jumping ship just yet. The president of one Pennsylvania-based solution provider who asked not to be identified, said he'd stick with Nortel, and its struggling isn't enough for him to completely abandon the vendor.

"I'm loyal to Juniper and I'm loyal to Nortel," he said when Juniper launched its program for Nortel partners. "I'm not looking to replace Nortel unless Nortel goes away."

Other partners also vowed to stick it out with Nortel, despite its financial troubles.

Stuart Chandler, CEO of Optivor Technologies, an Ellicott City, Md.-based solution provider and Nortel Elite Advantage Partner, said he expects Nortel to emerge stronger from bankruptcy, and he's not yet re-evaluating his relationship with them.

"They haven't discontinued any products or any support," he said. "Nothing has changed. This is a self-bailout. They're creating a safety net for the buyers."