Nortel sets off price war with huge cuts

Cisco Systems has come under a full-scale attack from rival Nortel Networks, which announced that it has slashed prices on some systems that compete directly with Cisco. Nortel also said it is releasing its Internet router networking technology in an attempt to drive customers away from Cisco.

Typically, routers allow voice, data and video to be transmitted across a network built around a variety of networking systems that are compatible to one particular proprietary network router system. Nortel said that by making its router technology available, hardware vendors could create new systems that will work with a variety of networking component systems.

Analysts said Nortel’s move, including cutting prices for its entire portfolio of access data routers to up to 50 per cent below that of products from Cisco, appears one of desperation, rather than a visionary strategic move. Cisco owns 60-70 per cent of the $7 billion global routing market, compared to Nortel’s 8-15 per cent. The market is projected to grow to $20 billion over the next 3-5 years. Cisco continues to strengthen its position in the networking market through acquisitions and quickly integrating acquired products and technologies into its product offerings.

At Nortel, officials said the new open source strategy would lead to lower prices and move the Internet networking market to a new non-proprietary level. "The challenge is, with the Internet growing so fast, is how do you change routing and enable it across more hardware platforms than just your own. So that's what our open Internet Protocol announcement is all about," said Nortel's head of enterprise solutions Bill Conner.