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In Rising Rivalry With Cisco, Microsoft Improves Its Position With Nortel Deal: Page 2 of 2

Nortel will bundle Microsoft's unified communications software into its phone systems, and the companies will codevelop communications software for business customers and telecom carriers. The jointly developed products, based partially on Microsoft's forthcoming Office Communications Server 2007 and Office Communicator, will include call center apps, telephony and mobile access systems, and data networking infrastructure.

Microsoft announced a flurry of partnerships with companies such as Mitel, Motorola, and Siemens in June when first discussing its unified communications road map, but none is nearly as far-reaching as the alliance with Nortel, since the others aren't codeveloping products.

For Nortel, the Microsoft deal is another piece of evidence that Nortel CEO Mike Zafirovski, who took over in November, is repositioning the company, including emphasizing IP telephony. Nortel has its own unified communications product, which it will continue developing, but it lacks the intuitive, friendly interfaces that other telephone equipment competitors such as Cisco and Avaya have. "This will allow us quite often to lead as opposed to playing defense," Zafirovski says. The deal puts Microsoft-Nortel in the game.