Zafirovski said the company expects to reap "well in excess of $1 billion" in new revenues over the next three years. Ballmer declined to provide financial projections, saying Microsoft was approaching the alliance as a long-term strategy.
The chief executives declined to disclose financial details of the alliance, which would include joint teams for collaboration on product development for mobile and wire-line markets. Nortel plans to complement Microsoft's unified communications platform with its enterprise contact center applications, telephony functions, mobile technology and data-networking infrastructure.
The deal, which includes an option to extend the alliance beyond four years, also includes development of training and incentive programs for joint sales teams. The companies also plan to invest substantial resources in marketing, business development and delivery. The alliance-developed products will be geared to small and medium-sized businesses, and the enterprise.
The partnership is a reflection of a dramatically changing communications market in which businesses are adopting Internet technology, particularly voice over Internet protocol, or VoIP, as a means to reduce the costs of traditional PBX systems and long-distance services. In addition, Internet-based communications provides more flexibility by enabling companies to integrate instant messaging, video conferencing and other software-based services into business processes automated through computer systems.
Microsoft is heavily focused on pulling communications into processes it hopes companies will build around its 2007 Office system. In June, Microsoft unveiled its unified communications platform comprised of five products: Office Communications Server 2007, Exchange Server 2007, Office Communicator 2007, Office Live Meeting and Office RoundTable. These products are expected to ship before June 30, 2007, the end of Microsoft's current fiscal year.