Petaluma's Calix signs marketing deal with Nortel

<p>Five-year-old Telecom Valley startup Calix said Tuesday it had reached an agreement under which networking giant Nortel will sell the company's products, a move that greatly expands the Petaluma firm's reach.</p><p>"Having a partnership with Nortel helps significantly broaden our footprint," said Kevin Walsh, vice president for the 185-employee Calix.</p><p>Calix already sells equipment to AlTel, Century Telephone and Frontier Telephone, the sixth-, seventh- and eighth-largest U.S. telephone companies, but the agreement with Nortel gives Calix another major distribution channel.</p><p>Calix will continue to increase its own marketing and sales efforts, but said "the expectation is Nortel will go out and attract new customers for us."</p><p>The Calix-Nortel announcement is the second major piece of good news for Sonoma County's Telecom Valley, the collection of high-tech companies along the Highway 101 corridor that has been hard hit by the recession and tech downturn.</p><p>Two weeks ago, Advanced Fibre Communications of Petaluma signed a five-year deal supplying its telecom equipment to Verizon, which is upgrading its nationwide, fiber-optic network to handle the broadband services.</p><p>The Calix-Nortel alliance is also a sign that telephone companies, bowing to competitive pressures, are starting to spend to improve their networks by adding high-speed Internet and video.</p><p>"It is about a network transformation," said Walt Megura, general manager of Nortel's broadband division in Richardson, Texas. "Service providers have tremendous competition globally, and all are focused on accelerating their top line. That translates to the requirement for new infrastructure, to add video and data to their voice networks."</p><p>This year, the Baby Bells alone are expected to spend $5 billion on network upgrades, compared to $3.7 billion last year, said Greg Mycio of the New Paradigm Resources Group in Chicago.</p><p>It is the first turnaround in spending that peaked in 2000, when the regional telephone companies spent $21 billion.</p><p>Much of the investment today is going to buy the new networking technology being developed by small companies, such as those in Sonoma County, Mycio said.</p><p>"The overall spending is shifting," Mycio said. "They are not going to buy traditional switches. They are taking the same money and spending it more likely on data products and convergence products that integrate voice and data.</p><p>"The survival of the companies like Nortel and Lucent depends on developing that product in-house or doing an alliance with companies that do," Mycio said.</p><p>Calix was founded in 1999 by some of the leaders of Telecom Valley, raising $260 million in funding.</p><p>It's product, the Calix C7, helps telephone companies put voice, data and video services onto copper or fiber-optic networks at increasingly higher speeds, now being dubbed ultra broadband.</p><p>"The concept we are gravitating around is ultra broadband," Walsh said. "We are talking about something that is 10 to 100 megabits, a quarter of the magnitude more than now offered. That requires capital investment by wireline service providers. In our market, we do think we are exiting from the telecom downturn."</p><p>Since its release almost two years ago, Walsh said Calix has sold 2,000 of its systems to 110 customers, primarily in North America. The system is not built to European telecom standards.</p><p>Under the agreement, Nortel will now begin using the Calix C7 in its end-to-end networking packages it provides telephone companies, plus provide some marketing and support.</p><p>Nortel's networking package "is for every wireline service provider," Megura said. "Each has their own requirements, but for Nortel, we are able to address them."</p><p>Nortel is among the largest providers of equipment, with sales in the 2002 fiscal year of $10.6 billion, with wireline equipment making up about 25 percent of the sales. In the last fiscal quarter, ending Dec. 31, total sales were $2.3 billion, of which wireline sales were $588 million.</p>