4 Reasons Microsoft Will Never Buy Nortel

On the eve of Microsoft’s major partner summit in Houston, TechTarget is speculating that Microsoft may one day want to acquire Nortel Networks. Hogwash. The VAR Guy knows at least four reasons why such a deal will never happen.

First, here’s the speculation from TechTarget — which claims that some Microsoft and Nortel partners think such a deal might make sense. Here are four reasons why such a deal will never happen, according to The VAR Guy.

1. Embrace and Replace: Microsoft has spent decades partnering with second-tier companies (examples: Sybase, Novell) to infiltrate new markets or counter established industry leaders (examples: Oracle and Red Hat). By partnering with Nortel Networks, Microsoft can potentially learn how to compete more effectively against Cisco Systems in the unified communications market.

Still, anyone who thinks Microsoft wants to start selling big networking iron — routers, switches, PBXes, telecom gear, etc. — doesn’t understand Microsoft’s corporate DNA. Microsoft can’t even keep the Xbox 360 from overheating, and the company’s home networking hardware products were dead on arrival. Do you think the software giant would attempt to manage global telecom phone systems?

2. Alcatel-Lucent: So far, the merger of Alcatel with Lucent has deeply disappointed investors. In the networking industry, big mergers of equals (examples: SynOptics with Wellfleet, 3Com with US Robotics, etc.) never work. While the merging companies are busy sorting out their executive perks, Cisco Systems hums along and crushes them in the market. Microsoft knows this. Instead of buying a big networking company, Microsoft will partner with all of them.

3. That Was Yesterday: Why — oh why — would Microsoft buy a legacy telecom company as the world increasingly moves to open source PBXes like Asterisk from Digium, software as a service (SaaS) and Web 2.0 technologies?

Sure, Microsoft may eventually compete with Cisco Systems. But companies like Google, Salesforce.com, Red Hat and Oracle represent far more immediate threats to the Microsoft empire. Surely, Microsoft won’t risk getting distracted on a big network hardware acquisition.

Nortel has done a nice job cleaning up its accounting problems, current management has stabilized Nortel’s business, and the company remains a major telecom equipment supplier. Yada, yada, yada … where’s the growth? One of Nortel’s closest watchers — Blogger Mark Evans — notes that the company is still looking for its “growth” opportunity.

4. Direct vs. Channel Support: Microsoft generally relies on partners to sell, service and support its software. Nortel’s big telecom customers demand responsive, real-time, world-class support directly from Nortel. That’s not exactly Microsoft’s strong suit.

Well, The VAR Guy has certainly set himself up for a big fall here. If Microsoft ever buys Nortel, The VAR Guy will have to eat a big serving of crow. In the meantime, he isn’t swallowing TechTarget’s theory about a potential Microsoft-Nortel combo.