Viewed at the height of the market bubble, perhaps in the year 2000, we had business in long-haul optical networks, such as linking L.A. to New York, where network carriers built these fiber broadband networks, including 10 Gigabit/sec. Dense Wave Division Multiplexing (DWDM). We had a substantial market share. Even then, metropolitan areas were getting fiberized in places such as London and Paris and New York, where you'd see fiber brought to major buildings. The big build-out was 1999 to 2001.
At Nortel, optical was 50 percent of our business in 2000, and now you look at it and it's 10 percent to 15 percent. But the enterprise customer piece is going very well. Our portfolio has long-haul fiber and metro DWDM, and we serve business enterprises such as banks and network carriers. A big feature is our Optical Metro 5000 switch platform.
So, if you go back to the heyday of long-haul DWDM, we're now again seeing good growth in the optical business.
Why? There are some major drivers. On the carrier side, we are getting optical transport, video-on-demand, and IP TV. Regional Bell operating companies and cable TV companies are driving a lot of growth on optical, whether metro or regional.
Enterprise is another growth segment. We see three verticals mainly. One is financial, including major banks. For disaster recovery, our value is we bring storage connectivity and (connectivity) between storage sites with the OM5000. Fourteen of the 15 biggest banks are using our equipment, and the reason is our reliability. We are recognized for quality and reliability. We've gone after that segment for four or five years. Banks might use us to connect their servers in Manhattan with New Jersey and (across) longer distances for storage connectivity. Sometimes it is a (120-mile) type of distance, and now we have the capability for really long distance -- say from L.A. to New York.
In health care, we've had a lot of announcements of business with hospitals through carriers, sometimes direct to the hospitals. All are doing storage, where they link MRI machines in clinics with other locations. Some university clinics are linked and want to have access to huge digital files and want security and reliability. It's been an interesting new segment, especially the private hospitals, where the new HIPAA regulations are forcing a lot of backup, and their distance backup requirement is good for us.
With schools districts, including the Philadelphia district, it's about service connectivity and allowing applications to run and getting more information to different schools. What schools need is a network capable of voice and video conferencing and distance learning. A lot want to be able to link student information in a metro area network or campus. They want low jitter, and sometimes you can't run videoconferencing over Multiple Protocol Label Switching and need optical.
So with optical, we hit bottom last year. ... But since then it's seen a good pickup. It's important that we have the right focus on investment. It was a mistake to have invested in long-haul DWDM, so we revectored our R&D in 2002 towards enterprise. The long-haul buying was by the carriers.
Will Nortel ever again see the growth in optical as it did back in the 1990s? We're not ever getting back to 50 percent of revenue. We may see single-digit growth on an annual basis, and I'd say we're going to grow faster than the market because we are well positioned in metro and enterprise segments,
You've been at Nortel 18 years, so what was it like to go from that high in optical to the bottom? It's a hell of a learning experience. You learn to grow rapidly and make decisions that are about sizing the business right. It's absolutely tough to go through head count reductions. ... Now, seeing the growth, it feels much better.
We've been able to maintain, even through the lows, our position as No. 1 in optical.
How many jobs were lost in optical since the bust? I can't say with optical, but Nortel had 100,000 employees and went down to 36,000. We've right-sized in terms of business and regions and operations.
The layoffs were tough. But with a lot of good long-term employees, with Nortel being global and with enterprise, wireless, wire line and optical divisions, there was a lot of moving around. ... Some who left have come back into Nortel. We're leveraging our portfolio, allowing us to do some new technology, such as bringing wireless into optical with the transporter and receiver.
What are you doing about Cisco, since they're always the big guy on the block? Well, I'd argue in optical that we're the big guy on the block. In mind share and market share, we have a stronger position. It's for us to lose. But to stay on top, you have to innovate.
So what is the next innovation in optical? The next innovation for us is that we'll have more packet functionality in IP networks, including statistical multiplexing for example. What we are bringing along is more Layer 2 packet functionality. You'll see us come out with an Optical Metro Ethernet platform, the 6500, a converged platform that does Layer 1, 2 and 3 (and) packet Sonet with DWDM onto optical. That's more functionality on a single platform, more efficiency and more survivability and a much simpler network.
There will be a focus on application enablement, beyond storage connectivity, and more will be done in boxes to do storage for health care and financial and related enterprises. So one focus is more packet functionality and the other is helping more in the application enablement for vertical markets.