WorldCity Business Magazine

(5) Q&A: Alivio Barrios - The Age of Hyperconnectivity

by WC

The share price of Nortel Networks Corp., North Americas largest telephone equipment maker, has been hammered in recent years. From a high of over $1,000 in the boom times of 2000, the stock recently sunk to a new all-time low of just over $7. Last year alone, the share price fell 71 percent. The situation is so dire that one prominent Wall Street analyst recently suggested that the only way for the stock to recover is to break up the company by selling off its profitable wireless telecommunications unit and focusing on its core wireline and enterprise solutions units.

Despite the doom and gloom, however, the scene at Nortels Caribbean and Latin America headquarters in Sunrise, FL is upbeat and all business. Nortel has been the leading telecom equipment provider in the Caribbean for decades. And it is a force in the rest of the region, too, from Mexico to the Southern Cone. *Last Nortel did $700 million of business in the region, close to 7 percent of Nortels global sales.

WORLDCITY sat down with the president of Nortels Caribbean and Latin America division Alvio Barrios, who replaced Martha Bejar as division chief in mid-2007, to talk about Nortels business prospects, as well as telecoms exciting new frontiers.

Barrios oversees 350 employees in Sunrise and another 1,000 employees in offices in Argentina, Brazil, Chile, Colombia, Mexico and Puerto Rico. Like most South-Florida-based multinational executives, Barrios, a 17-year telecom industry veteran, is on the road three weeks out of every four. Born in Cuba, Barrios received a degree in electrical engineering from Florida International University and joined BellSouth as a network engineer. He has been with Nortel for the past 14 years. Prior to taking on his current assignment, Barrios was regional sales vice president, responsible for Nortels largest customers and strategic accounts in the region.

WorldCity: Hows business?

Alvio Barrios: The company is more profitable now than any time in the past three to four years. We have a healthy balance sheet. And in 2007, we raised our gross margin to 43 percent.

WC: The stock market doesnt seem to fully appreciate that.

AB: The market still sees Nortel as a legacy provider, a traditional wireline equipment manufacturer. But we are a different company today. We are moving away from the traditional switching systems. And we are the leader in the next phase of communications.

WC: Whats the next phase?

AB: Its all about hyperconnectivity and unified communications, the convergence of IT and communications. We are ranked #1 by Gartner in unified communications.

WC: What will this next phase look like?

AB: For starters, its no longer tele-communications. We are in the communications business. We are moving away from the telephone and communicating through the TV, the PC, the Playstation, and all sorts of devices. Everything will be integrated. The biggest challenge for the industry is to make the consumer experience simple. The consumer wants one transparent, seamless experience.

WC: How is Nortel adapting to this new world?

AB: We are separating the software from the hardware. This is a major step for Nortel. We used to sell in boxes servers, switches, etc with the software built-in. Now, we are working with IBM, Dell, Microsoft and other companies to enable applications with our communications software. We are enabling the desktop for communications. We call this unified communications.

WC: Can you give an example of how this works?

AB: Lets say you visit a website that is virtual storefront. You browse through the products and you see something you like, but you want to talk to learn more about the item. So you simply press click-to-call to speak to a salesperson, or you click to chat. Thats Nortel communications software enabling that experience.

WC: Whats the big driver in the telecom industry today?

AB: Theres a thirst for broadband, more megabits per second, more interactive experiences. Its no longer about adding more wireless, its about adding more applications.

WC: What kind of applications?

AB: People want to be able to have a videoconference on their plasma TVs while they are watching a sports show. They want voice recognition in their cars and in their homes. With the fourth generation (4G) technologies and new high-powered optical systems on the way, these things are going to happen faster than you think. And all youll need is one big server next to your air conditioning unit in the closet and, of course, a 40 gig or even 100 gig-per second fiber optic connection.

WC: How does Nortels fit into this picture?

AB: Well be providing all the intelligence and electronics behind that system.

WC: So when will this lead to a higher Nortel share price?

AB: Perceptions will change as we execute this new phase.

WC: Is Latin America ready for this new phase?

AB: Absolutely. The young generation in Latin America is really tech-saavy. They get it. In the past, purchasing power was always a challenge, but now the region is more solid economically than ever before. And the whole new ecosystem of communications devices cell phones, inexpensive laptops, Wii, Nintendo is more accessible.

WC: Hows business in region?

AB: Overall, we grew 3-4 percent in 2007. In our Enterprise division, we grew two to three times the market (rate of growth). Sales of services grew by 15 percent and our optical business
(optic fiber networks and ethernet networks) was also strong.

WC: Are you forecasting a good year in 2008?

AB: Annual telecom growth in Latin America is about 8 percent. More importantly, while wireless penetration is up to 65 percent, broadband penetration is less than 5 percent. Thats a great opportunity for Nortel.