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In 2007, Nortel spend $1.85-billion (down 15.8% from 2006) on R&D, 50% more than second-ranked, BCE Inc. Nortel and BCE were the only companies that spent more than $1-billion on R&D last year.

Overall, R&D spending by Canada’s 100 largest R&D-focused companies fell to $10.3-billion from $10.6-billion.

“R&D spending in Canada is heavily influenced by Nortel Networks and BCE and both posted sharp declines in 2007,” says Ron Freedman, CEO of Research Infosource. “Removing these firms from the equation, R&D spending grew by 3.3%. However, if we correct for inflation, spending remained flat over the period.”

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Not surprisingly, it’s the highest ratio of any company spending more than 10% of its market cap on R&D. #2 on the list is Advanced Micro Devices, which has a R&D/market cap ratio of 0.72 ($1.88-billion of R&D vs. a market cap of $2.6-billion).

Here’s the criteria used: U.S. and Canadian exchanges (no healthcare companies), market cap of more than $1-billion, sales of more than $5-billion.

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Good question.

Rudolph Kriegler, one 75 new appointments to the Order of Canada, joined Nortel after escaping Hungary in 1956. He made his mark at Nortel by making important discoveries in silicon and advances in optoelectronics, which led to the development of the company’s fibre-optic transmission equipment.

Kriegler was Nortel’s leading “intelligent subversive” because he lobbied and led the development of optoelectronic devices without his bosses’ approval.

“They didn’t want it done internally,” Mr. Kriegler told the Ottawa Citizen. “I did it against orders, but at that point I had fairly large latitude.”

For more Kriegler and his contributions at Nortel, check out the Ottawa Citizen.

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The facility, which most conducts R&D on a 59-acre site, employs 400 people. According to Nortel’s Web site, the Calgary camus has “been recognized for quality and employee relations by the Canada Awards for Business Excellence”

The facility is closing as Nortel consolidates operations at fewer locations. It is somewhat ironic that Nortel expanded the Calgary campus in 2000 after having people spread among various locations in the northeast part of the city.

For more information, check out the Calgary Herald.

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Deutsche Bank analyst Brian Modoff, who is among the most “colorful” commenters, seems to be unconvinced the new approach to R&D will make a difference.

“(Nortel’s) pursuing multiple-end markets, so it’s jack of all trades but master of none,” he told the Ottawa Business Journal. “People are asking, ‘Why is this a $6 stock again?’ because no one knows who they are as a company. They muddle in a lot of things. Where are their core competencies?”

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The highlight – and this should come as no surprise – is that more R&D will be happening in China involving all four of the company’s business units. For Canadians worried about Nortel’s extensive R&D operations, Ottawa and its 5,000 engineers will remain a “full service unit” for the carrier, business network, software and service units.

Meanwhile, nine centers have been identified in the U.S., Ireland, England, Turkey, India and Korea while four “specialty sites” with a narrow focus will be in Canada, the United States and France.

So now for the quote of the day:

“We’re not trying to be all things to all people,” said David Hudson, Nortel’s vice-president of portfolio management. “That kind of focus, around a core set of technology assets, I think is important. It says we’re … going to matter for a few really important things and we’ll work with partners for the rest.”

Trying to be all things to all people has been one of Nortel’s biggest strategic issues since the telecom boom went bust. Why it took the company so long to embrace this reality is puzzling but if you’re one of those people looking for good news, this could be something to get excited about.

For more coverage, check out the Ottawa Citizen.

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In a speech in Ottawa, Roese said this will involve retraining some of Nortel’s 12,000 R&D employees and may see job and project relocations. He added that it will not see any new job cuts. “The bottom line is it will be driven by skills, it will be driven by where we have the capacity and the economics to support the necessary skills to participate in this market,” Reuters reported.

Interpretation: One of the ways that Nortel plans to reduce its R&D budget is by moving jobs to lower-cost places such as China and India. If you’re an R&D employee in Ottawa, Richardson, Tex. or Raleigh, N.C., you might be wise to dust off your resume.

The key phrase to focus on is Roese’s contention there will be no new job cuts. What, I think, he means is while the number of people involved in R&D will not decline, they will be configured and located differently.

For what it’s worth, Cisco spent about 12% of total sales on R&D in fiscal 2007 – $4.1-billion on sales of $34.9-billion. Nortel’s R&D budget is about $1.7-billion.

More: Roese gave Ottawa a B- for its quality R&D centre. Ouch! Roese also blogs about the transformation of Nortel’s R&D activities.

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Nortel continues to be the leading R&D player with spending of $2.2-billion, a 2.2% decline from 2005, but still pretty impressive given it’s about 20% of revenue. Of course, don’t expect Nortel to maintain this kind of revenue-to-R&D ratio as it focuses on controlling costs.

Jackson Wu, who heads up Nortel’s Chinese operations, told Bloomberg News that “a significant portion” R&D jobs will move to China because “the difference in costs is just too big”. He declined to be specific about many more positions would be created in China, where Nortel now employees 2,000 engineers.

In the past year, Nortel has boosted its operations in China, including a new centre of excellence in Shanghai that will enhance the company’s ability to provide supply chain operations and procurement in China. To give you a sense of how much business Nortel is doing in China, the company will source more than $1-billion of supplies from China this year.