Troubled telecom-equipment manufacturer

Nortel Networks

(NT)

has overhauled its carrier business, discontinuing its mobile

WiMAX

operations and ending its short-lived joint venture with Israeli wireless specialist

Alvarion

(ALVR)

.

The Ontario-based firm, which recently filed for

Chapter 11

bankruptcy protection, is desperately attempting to put its house in order, and hopes that its latest move will help it better manage its costs.

"We are taking rapid action to narrow our strategic focus to areas where we can drive maximum return on investment," said Richard Lowe, president of Nortel's carrier business, in a statement released Thursday. The executive explained that Nortel's existing WiMAX customers will move over to Alvarion, and he promised that existing support commitments will be met.

Nortel signed an agreement last year to integrate Alvarion's radio access network technology into its own network, backhaul and global services offerings and also resell the Israeli firm's WiMAX access products.

"Our priority is to minimize the effect on customers," said Tzivka Friedman, Alvarion's CEO, in a statement. "We will work closely with Nortel to ensure that the transition will be as smooth as possible."

Alvarion's shares nonetheless slipped 13 cents, or 3.8%, to $3.26 in Friday trading, outpacing the broader decline in tech stocks. The Nasdaq dropped 0.8% recently.

WiMAX technology, which was developed as a wireless

alternative

to broadband and DSL, has been gaining

momentum

, driven largely by sales of

smartphones

. Nortel's decision to exit a potentially lucrative 4G market, however, reflects the extent of the firm's recent problems.

The Canadian firm, which has been wrestling with

plummeting sales

of its wireless gear, also announced plans to

divest

its metro Ethernet networks division in September and is rumored to be carving off more of its business.

Nortel, which competes with a slew of companies, including

Cisco Systems

(CSCO) - Get Report

,

Alcatel-Lucent

(ALU)

and

Motorola

(MOT)

, is also coming under pressure from its opportunistic rivals.

F5 Networks

(FFIV) - Get Report

, for example, recently became the first of Nortel's competitors to exploit the equipment manufacturer's bankruptcy filing, unveiling a buyback program for Nortel's switch technology.

Hewlett-Packard

(HPQ) - Get Report

is also looking to exploit the Canadian company's situation in an attempt to sell more of its

ProCurve

family of networking products.

Communications specialist

Avaya

already offered its "trade in trade up" program for Nortel and Cisco gear prior to Nortel's bankruptcy filing.

The networking arena, like many other parts of the IT market, looks set to become more competitive in 2009 as firms fight for shrinking budgets. In one case this week, gearmaker

Juniper Networks

(JNPR) - Get Report

projected weak sales

.

Technology research firm Forrester recently predicted that users' investment in communications equipment will decline during the coming months. Purchases of routers, switches, private branch exchanges, videoconferencing equipment and unified communications equipment will fall to $353 billion, it said, a 3% decline from 2008.

Nortel's decision to end its Alvarion joint venture and leave the mobile WiMAX business also reflects the challenges facing the broader wireless industry.

Wireless firms and handset manufacturers have certainly been feeling the

effects

of the economic downturn, as evidenced by recent

results

results from Motorola,

Sony Ericsson

, and

Nokia

(NOK) - Get Report

, which missed fourth-quarter numbers and says mobile-phone sales for the industry will fall 10% this year.