Nortel has agreed to sell its UMTS unit to - surprise, surprise - Alcatel for $320-million. It was only a matter of time before Nortel sold the money-losing business, and Alcatel seemed to be the most logical buyer. While Nortel can certainly use the $320-million, it is below the expectations of analysts, who were looking for about $500-million. Nortel held a conference call today at 9 a.m. to provide an “update on advances to the execution of its business plan”. According to analysts, Nortel's UMTS access business was losing about $200-million a year on sales of $400-million to $500-million. No wonder Nortel wanted out so badly. With UMTS out of the way, Nortel CEO Mike Zafirovski can now focus on other parts of the business that don't meet his 20% market share benchmark. At the end of the day, Nortel will be a smaller player but, hopefully, profitable.
Update: For more views on Nortel, check out All Nortel, All the Time.

Now that Cisco is sexy again (stellar fourth-quarter results, strong growth projections for fiscal 2007, the savvy acquisition of Scientific-Atlanta), tech/TV watchers should pay attention to its latest acquisition: the $92-million purchase of Arroyo Video Solutions, which makes software to help cablecos and carriers deliver video-on-demand services. The acquisition is the latest in a string of video-related deals that Cisco has made in recent years (perhaps Linksys could be included given it expand video within the home) to reposition itself at a time when many of its rivals (Nortel, etc.) are scrambling to figure out where they want to be and what they will look like in the wake of fierce competition. Cisco, meanwhile, is far ahead of the pack with a strategy that may become CEO John Chamber's legacy. Watch this space, watch this company. For more, check out GigaOm.

The New York Times has an enlightening story today looking at how Verizon plans to spend $20-billion to deliver fiber-optic connectivity to residential households. Why? Well, Verizon believes it has no choice if it wants to deliver the same kind of bandwidth-hungry services (high-definition television, video-on-demand, etc.) as cable rivals such as Comcast and Time-Warner. It's a huge investment and a strategic gamble but many carriers have no choice if they want to compete on a level playing field with their cable rivals, which have been happily signing up hundreds of thousands of new home phone customers from carriers in recent years. It is interesting that while Verizon aggressively pushes forward with fiber-to-the-home, Canadian carriers Bell Canada and Telus Corp. are betting on fiber-to-the-node This means they are pushing fiber close to households, and then hoping compression technology can give the big, fat pipe over the "last mile". Will this strategy pay off? Well, only time will tell but the strong growth of Canadian cablecos such as Rogers, Videotron and Shaw recently is a troubling development for Bell and Telus. One thing I do find fascinating about the carrier-cable battle is how the cable industry has used CableLabs to support its efforts. For those unfamiliar with CableLabs, it's a non-profit R&D consortium that develops innovative products and standards for its members. You would think the carriers would have - or should have - something similar to effectively fight back. Instead, the carriers rely on cash-strapped telecom equipment suppliers for new products and services, while arguably not spending nearly enough on their own R&D. For more on FTTH, check out Information Week, which writes about the technology's strong growth, albeit from a small base.

Jozef Straus, who became a poster boy during the telecom boom for the rise (and fall) of JDS Uniphase, has popped back into the telecom spotlight as a strategic advisor to Enablence Technologies Inc. The beret-wearing Straus has kept a low profile since he retired in 2003 with US$150-million - most of it through exercising options when JDS was riding high. Meanwhile, JDS has gone through some tough times: the stock crumbled, sales tumbled and the fiber-optic company's operations in Ottawa shrank from more than 10,000 workers to a few hundred. Enablence is a start-up developing a chip that will reside inside an optical modem to provide high-speed connectivity of 1.2Gbps to households. My story on Straus and Enablence in today's Financial Post can be found here.

Digium CEO Mark Spencer has spent a lot of time over the past few years politely turning aside the advances of VCs but he has finally caved in by taking $13.8-million from Matrix Partners. For open-source supporters, it's another sign the "movement" has gone legit. Of course, Red Hat buying JBoss for $420-million earlier this year was a pretty good sign that open source was entering the mainstream. So why did Spencer, who I once described as the Linus Torvalds of IP-PBX, taking the cash? Well, it's not exactly clear because he says Digium, which oversees development of Asterisk and sells related hardware and services, doesn't really need it. In talking with Spencer, it sounds like he's aware of the growing competition from small and larger rivals, and wants to make sure Digium has the cash it needs to strategically respond. "This is really about trying to make sure we do the right things going forward," he said. "When you start out, there is a lot of room when you are making a new industry to make some mistakes and get away with it. As you get farther along and get people on your tail and paying attention to what you are doing, you have a lot less room, and we need to make sure we preserve a lot of the things we have done that are good."  Spencer said the deal with Matrix, which financed JBoss, is not a traditional VC arrangement. While declining to provide a lot of details, he said it "preserves the spirit of the company and leave the company in control" - nice terms if you can get them. Of course, Digium had some clout given it's been profitable since 2002 and growing revenue by 100% a year.
Note: For more, check Red Herring and BusinessWeek.

The telecom equipment market is under siege - at least in this part of the world where Nortel is trying to slowly restructuring itself back to health. So it is seems, well, strange to hear Redback Networks's ambitious plans to double its workforce to 1,200 from 600 over the next year. In an interview, Mimi Gigoux, who heads up worldwide human resources for Redback, said the company is looking to hire in Canada and the U.S., rather than going off-shore to low-cost regions such as China and India. So what's behind the bullish hiring plans? Redback believes the "explosion" of Web-based services such as IP-TV, VOD and VoIP means huge demand for its edge-routers - a market where the competition includes heavyweights such as Cisco, Juniper and Alcatel. An interesting comment by Redback is their belief the telecolm equipment market is dividing itself between the large players, who are becoming system integrators, and smaller, niche players focused on specific types of technologies. Investors appear to have not picked up on Redback's optimism as the stock has dropped 40% in the past three months.
Update: Speaking of bullish, Cisco CEO John Chambers provided an enthusiastic outlook for the company's fiscal 2007 prospects yesterday with an expectation of 15% to 20% revenue growth. "We are gaining market share against nearly all our peers in the service provider segment," he said during a conference call after Cisco posted better than expected fiscal fourth-quarter results.