Attack / Defense Against Nortel

1. Attack / Defense Against Nortel CSBU LEV Business Development

2. Agenda • Nortel’s offer • IP telephony • Contact center • What Nortel claims about: • Themselves, their solutions and Alcatel • Responding to Nortel claims • Competitive positioning • SWOT • Key differentiators • Price positioning • Summary

3. LAN- Nortel’s Offer for MLEIP Telephony Succession R3.0 Software VxWorks Succession 1000M Hybrid Succession 1000 Full IP • Signaling server • Manages IP signaling • H.323 GK, GW • Call server • - Up to 1000 users • Media Gateways • Up to 4 per CS • Meridian IPE cards • 4 / 8 slots • Up to 448 phones • Call Server • - Meridian Call Controller • Up to 10K IP users • Media Gateway • Opt. 61c or 81c IPE cabinets Campus Signaling Server BCM Independent Branch Office • All in one voice and data • Based on Norstar • Separate user interface & management from S1K • Succession • Branch Office • 40 to 200 users • Survivable (local processing) • - Up to 255 per system • - 3 stacked Boxes • Succession • Remote Gateway • 5 to 50 users • IP phones survivability- local trunking • - BCM Branch BCM 200 BCM 400 Peer networking via H.323 / MCDN

4. Nortel’s Offer for MLEApplications and Phones • MCS 5100 • SIP-based multimedia / collaboration platform • Collaboration – conferencing, whiteboard, co-browsing, file exchange, web push • Personalization – call screening, call logs, call mgt., routing • Multimedia – video calling, picture caller ID • Presence and IM (proprietary) • Gateway connection to Succession 1000 • Call Pilot Unified Messaging • Optivity Telephony Manager • IP Phones: • i2001 – single-line, no display • i2002 – 4-line display • i2004 – 12-line with 5x24 LCD display • XML applications via Net6 server • i2050 softphone and i2050 Mobile Voice Client for PDA • H.323, MGCP and SIP compatible i2004 i2002

5. Nortel’s Offer for MLEContact Center • Symposium server-based solution is composed of: • Symposium NCC (Network Control Center) for routing • Symposium link (Meridian Link 4 plus additional functions) for CTI • Symposium Agent • Periphonics IVR • Symposium Express • Bundled solution for up to 80 users • Symposium Web Center Portal (SWCP) • Periphonics infrastructure

6. Agenda • Nortel’s offer • IP telephony • Contact center • What Nortel claims about: • Themselves, their solutions and Alcatel • Responding to Nortel claims • Competitive positioning • SWOT • Key differentiators • Price positioning • Summary

7. Nortel’s claims about themselvesand our responses • 100-year heritage in telephony • Same as Alcatel • Global company in 150 countries with 50 million telephony lines sold worldwide • Alcatel is in 130 countries and has 500,000 enterprise customers • Number 1 globally in enterprise IP telephony line shipments (Dell’Oro) • According to the same report, Alcatel was #1 globally in IP-PBX shipments • Strong focus on enterprise – one of four core business areas • Nortel backed away from enterprise in 2001/2 and re-initiated when carrier market sank; Alcatel has maintained a constant focus on enterprise • Financially strong due to balance across carrier and enterprise markets • 2002 revenues of $10.56B; Stock price up over 1200% from low of $0.47 in October 2002 • Enterprise accounts for approx. 25% of revenue • Nortel is still plagued by financial difficulties and scandals; Alcatel’s revenue in 2002 was $16B; our stock price has maintained a more stable position with recent strength; and enterprise is a significant contributor to our revenue as well

8. Nortel’s claims about their solutionsand our responses • Offer full range of deployment options • Pure IP, IP-enabled, telephony, IPCC, multimedia • The OmniPCX Enterprise provides a unique solution with a single software base covering the smallest branches to the largest campuses with feature transparency, consistent user experience and a single management tool • Alcatel’s migration path is the smoothest in the industry, requiring only a software upgrade in most cases • VoIP solutions deliver the flexibility, reliability, and investment protection you expect from Nortel Networks • Nortel is late in the VoIP game and still playing catch-up • Broadest portfolio of enterprise solutions, including strong data portfolio • Alcatel has a superior campus data portfolio for supporting real-time applications, i.e. voice • Service provider heritage brings ultimate reliability • Alcatel also benefits from having service provider expertise and provides a broader range of high-availability features

9. Nortel’s General Competitive Strategy • Channel strategy • Indirect • NextiraOne and Verizon primary channels in North America • Marketing messages • Vision: One Network, a World of Choice • Evolution without compromise • Engaged Business Architecture (EBA) • Eliminating the boundaries between voice and data, wireline and wireless, and public and private networks • General • Nortel tends to “milk” their large installed base, with add-ons, upgrades and services • Nortel is not winning a lot of “greenfield” business

10. Agenda • Nortel’s offer • IP telephony • Contact center • What Nortel claims about: • Themselves, their solutions and Alcatel • Responding to Nortel claims • Competitive positioning • SWOT • Key differentiators • Price positioning • Summary

11. SWOT Analysis Nortel Networks • Weaknesses • - Behind in IP telephony – very late in introducing • Succession • - SIP incorporated as an expensive, overlay solution • Weak branch story – Succession 1000 only scales • down to 80 users and BCM a totally separate • product-line • Proprietary, non-redundant CTI link • Strengths- Diversified across telecom for financial • stability • Well-established channel strategy • Expertise in telephony • - Relatively strong data portfolio • Strong migration strategy for installed base • Opportunities • Large installed base in voice to churn • Installed base in data • Strong service provider business to leverage • (channels and product synergies) • Threats • Company may back away from enterprises again if • service provider market turns around • Lost ground / respect due to late entry

12. Competitive positioningArchitectural flexibility • Complex IP telephony architecture with lots of separate servers • Separation of call server and signaling server • Signaling server required at each WAN site • Call server connect directly to local media gateways, point to point MG connection • Expensive resiliency • Call server and signaling server both must be duplicated • Branch survivability relies on standby local processor at each WAN site • Call server still based on a proprietary hardware and runs on VxWorks • Limited scalability • 1,000 IP phones on Succession 1000 pure IP architecture Succession 1,000M (Meridian HW) scales up to 10,000 users • Max. of 10,000 phones in network • SIP platform (MCS 5100) not cost effective below 500 users • No XML telephony and management API

13. Competitive positioningIntelligent networking • Succession media gateways are not cost-optimized for branch offices • Succession Branch Office only scales down to 80 users • Only four or eight slots with high-density Meridian 1 interface cards • Signaling server and call processor required at each site • BCM may either be positioned for • “independent” branch offices • Lack of feature transparency (MCDN vs. ABC) • Two different management systems • Different software base, so different user interface / feature-set • Survivable remote gateway (BCM HW) • Emergency level PSTN connectivity only in survivable mode • Trunking only, no branch digital phone support (IP, analog and DECT) • Two different management systems

14. Competitive positioning Agile workplace • IP Phones • Only two models in the i200X range currently available • Does not appear that the single-line i2001 is shipping (still) • Phone displays are character-based (not pixel) so weak for graphical content • Neither the M3900 digital phones nor the IP phones provide an alphanumeric keyboard • i2050 Softphone • Basic dedicated set emulation • No advanced integration with Lotus Notes and Microsoft Outlook • No web access • Unified Communications • CallPilot is a first-generation unified messaging solution - no SIP, XML, VxML • SIP supported as an overlay solution in the MCS 5100 • Scaled down carrier product – not cost-effective for under 500 users • No XML or VXML support, so no eBusiness integration

15. Competitive positioningCustomer Interaction • Symposium vs. Genesys • Network routing: • Third-party package not well integrated; results in extra time / cost for integration • Two routing strategies – network and PBX • Limited level of skill-based routing • Limited queuing technology options • Limited scalability • Does not support multiple switches or universal queue • Complex, voice-only reporting • Unable to support Universal queue due to lack of single framework • Succession vs. OmniTouch • Nortel not marketing embedded voice-only CC like OmniTouch • Symposium for departmental must be on separate server

16. Analyst quotes • Current Analysis, 9/03: “…the product does not particularly stand out from the crowd. … the system gives new customers little reason to choose Nortel packet telephony equipment over those of other vendors.”

17. Agenda • Nortel’s offer • IP telephony • Contact center • What Nortel claims about: • Themselves, their solutions and Alcatel • Responding to Nortel claims • Competitive positioning • SWOT • Key differentiators • Price positioning • Summary

18. Pricing • Nortel’s price-positioning for IP (Succession) is very expensive • We generally do not see them • Highest per-user pricing in Miercom benchmark article, BCR, January 2004 ($796 per user) • For TDM: • Nortel does about 70% of their business on installed base • Nortel BPs can buy equipment from the refurbished/second-hand markets • For large enterprise, almost every deal goes through executive discount • Current Analysis, 9/03: “The system pricing tends to range from approximately $650 to $750 per voice station. This price tends to apply to relatively large installations (up to about 2,000 users). Smaller installations tend to cost more – approximately $1,000 to $1,100 per station.”

19. Agenda • Nortel’s offer • IP telephony • Contact center • What Nortel claims about: • Themselves, their solutions and Alcatel • Responding to Nortel claims • Competitive positioning • SWOT • Key differentiators • Price positioning • Summary

20. How to attack Nortel (1/3) • Architectural flexibility • Nortel is late in IP telephony and is still playing catch-up in its architecture • Going with Nortel for a customer means: • High TCO: several different servers and boxes per site • Nortel-proprietary hardware and VxWorks • Succession is not a supplier of wed services (no XML API) • Intelligent Networking • Nortel does not have a well-integrated, low-end branch solution • Going with Nortel for a customer means: • Choice between expensive Succession branch solutions or separate, independent BCM systems

21. How to attack Nortel (2/3) • Highest Reliability • Nortel has expensive resiliency • Going with Nortel for a customer means: • Call servers and signaling servers must be duplicated • Remote sites require call servers for survivability • Agile Workspace • Nortel’s unified communication suite offer is based on multiple platforms (MCS5100 , softphone and CallPilot) • Going with Nortel for a customer means: • No consistent unified communication application suite • Higher integration costs (no XML, VxML) • Limited future-proofing (Softphone, UM)

22. How to attack Nortel (3/3) • Interaction Management • Proprietary interface to Genesys • No longer support departmental embedded CC • Silos for advanced applications (individual blocks from separate acquisitions) • Going with Nortel for a customer means: • Higher integration costs • Higher capital and management costs for departmental CC

23. Thank you