Microsoft, Nortel in Business Communications Pact

Posted 19 July 2006 @ 12:35 am EET     Print     Reprint     E-Mail     Comments

SEATTLE (AP) - Microsoft Corp. said on Tuesday it was in an alliance with Canada's Nortel Networks Corp. as part of a push to run traditional business telephone systems on PC software.

Telecom equipment supplier Nortel said it expects to reap more than $1 billion in new revenue over the life of the four-year pact, under which the companies will work together on research and development and partner on sales and marketing.

"This is a gutsy play for Nortel - accelerating the move of our voice technology into software as part of our broader business strategy to transform the company into a software and services leader," Nortel chief executive Mike Zafirovski said in a statement.

Microsoft aims to simplify the way workers communicate with one another by using software to link the new phones to computers so that they can handle voice functions, such as making a phone call or receiving voice mail, and work easily with instant messaging, e-mail and video conferencing.

Microsoft's push into business telephone market pits the company against Cisco Systems Inc. (Nasdaq:CSCO - news) and other competitors seeking to capitalize on a shift by large companies to cheaper Internet-based telecommunications.

Microsoft and Nortel said that under the deal, which can be extended, they will license some of each other's intellectual property and deploy the other's technologies in their corporate networks.

They will jointly sell the services once they are developed, as well as invest in marketing and delivery. Shares of Nortel on the New York Stock Exchange were up 9 cents, or 4.6 percent, to $2.05 in early afternoon trade, while Microsoft shares rose 24 cents, or 1.1 percent to $22.72 on Nasdaq.