Newbridge at the core: What Nokia ownership means for Kanata’s flagship operation

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When Paris-based Alcatel shelled out $7.1 billion US 16 years ago to buy Newbridge Networks, few doubted this was a watershed event for Ottawa’s tech industry.

Newbridge, a maker of telecommunications networks, was Terence Matthews’ most successful startup – a symbol of what could be accomplished from a small town in Canada. Matthews at the time owned nearly 22 per cent of his company’s shares, worth a cool $1.5 billion US.

Soon he tapped into some of this wealth to build hotels, golf courses, invest in dozens of high-tech startups and re-acquire control of Mitel Networks. Kanata commuters watched it all unfold.

But what they didn’t see was the Newbridge core that was left behind. The company employed 5,300 when Alcatel took it over – including about 3,000 (including contractors) on the Kanata campus. Most of the Newbridge staff based outside Kanata was let go or disappeared into the ranks of Alcatel’s global sales and marketing machine. Nearly all of Newbridge’s top executives left.

Fortunately the research and development staff stayed – though the Kanata campus has slimmed over the years to about 2,400 employees and contractors. That’s the way it is for most high-tech acquisitions. The R&D is the key – and as long as it remains fresh, the employees have a future.

So it’s been with the former Newbridge engineers, who specialize in Internet protocol and optical technologies, and who have made themselves indispensable to a succession of corporate owners. Alcatel merged with U.S. giant Lucent Technologies in 2006. Last January, Finnish tech giant Nokia bought Alcatel-Lucent.

James Watt, the chief operating officer of Nokia’s IP/optical division, has been through it all. Now 52, he joined Newbridge in 1986 fresh out of engineering school. Indeed, he was one of the startup’s first employees.

“We’ve been through this a few times on this campus,” Watt said in reference to the latest takeover. “About 30 per cent of our people now overlap with other Nokia units and we have to figure this out.”

Roughly 70 per cent of those who now work on Nokia’s Kanata campus are fortunate — there’s no overlap. These employees are in Nokia’s IP/optical group – Watt’s unit – and fixed networks. Nokia’s other main business units – applications and analytics, and wireless networks – are where the duplication lies.

However, this doesn’t mean that hundreds of Kanata workers are in danger of losing their jobs. “We don’t want to lose good people,” said Watt. “What you do is you take bright people and move them on to different projects when the product portfolio changes.”

And Watt knows there will be changes. For three decades he has been at the heart of a tumultuous industry, experiencing the euphoria of the telecom bubble, the despair of the post-2000 crash and the bone-crushing consolidation of its largest players.

“We’ve ended up in a place that few people would have predicted,” Watt said, referring to a world in which Nortel is history and Nokia has become its natural heir.

Indeed, many are surprised to see Nokia’s corporate logo now dominate the Kanata skyline along the city’s technology row.

Wasn’t Nokia the global leader in mobile phones and didn’t it lose that war to Apple’s iPhone and Samsung’s Android devices? Yes and yes.

So clear is the common public perception of Nokia as a designer and maker of handsets, that even now few are aware that half the company’s business has traditionally involved telecommunications networks – the heavy-duty infrastructure that used to be Nortel’s forte.

Six years ago, 64,000 of Nokia’s 124,000 global employees built networks. In 2013, the Finnish firm sold its mobile phone business to Microsoft, the U.S. software giant – which reduced Nokia’s total head count to just 55,000. Now nearly all its workers are in the infrastructure side of the business.

But at least Nokia – unlike Nortel – had a fallback position. The enduring strength of its networking group was no accident.

Even before it was clear the Finns would lose their lead in mobile phones, they set out to acquire critical mass in the business of building networks. After failing to win a bid for Nortel’s wireless products unit in 2009, Nokia shelled out $1.2 billion US the following year for Motorola’s wireless infrastructure business. In 2013, the Finns completed their purchase of Siemens’ telecom gear unit.

Despite the cost of these deals, and major losses prompted by the freefall in mobile phone sales, Nokia still had more than $10 billion US cash on hand last year – and very little debt. This allowed it to make a nearly $17 billion US all-share offer for Alcatel-Lucent – the France-U.S. combo that used to be Nortel’s most direct competitor.

The multiple deals mean Nokia has nearly all the pieces of technology it requires to build tomorrow’s networks. They also give the Finns some crucial heft as they prepare to battle China’s flagship telecoms firm Huawei and arch-rival Ericsson – the planet’s No. 1 wireless products company – especially now that Ericsson has formed an alliance with Cisco Systems of California.

Watt so far sees little difference as far as corporate culture goes. The everyday language for both the Finns and the French is English – and both corporations are very demanding when it comes to results.

Watt travels more, thanks to the extra leg from Western Europe to Helsinki. One difference is that when he arrives in Finland his Nokia colleagues will catch him up on National Hockey League games – nearly 40 Finnish players are currently active, including stars Mikko Koivu of the Minnesota Wild and Jussi Jokinen of the Florida Panthers.

“They follow these guys very closely,” Watt laughs. Perhaps as closely as they’ll watch the activities in their newly-acquired Kanata operation.

jbagnall@ottawacitizen.com

Twitter.com/JamesBagnall1

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