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Bay buy splits up Nortel, Avici
By JIM DUFFY
Network World Fusion, 06/25/99
Nortel Network and terabit router
start-up Avici Systems have
ended their business relationship. This comes in
response to skyrocketing market valuations for
Internet start-up companies as well as Nortel's
acquisition of Bay Networks, Avici says.
Nortel acquired 20% of Avici in early 1998 as a
prelude to shipping a Nortel-branded version of
Avici's Terabit Switch Router (TSR). In mid-1998,
Nortel acquired Bay, the No. 2 router vendor behind
Cisco.
Nortel will maintain its equity stake in Avici but will
not distribute the TSR, says Pete Chadwick, vice
president of marketing for Avici. Nortel has also
given up its seat on the Avici board.
"It's most directly a result of their Bay acquisition,"
Chadwick says. "But from our perspective, we kind
of looked out at what was going on in terms of the
marketplace. Fifteen months ago it seemed that to
really penetrate the carrier space you needed to
align yourself with larger equipment providers. As
evidenced by some of the recent public offerings,
that's no longer true."
Lucent today acquired Avici competitor Nexabit
Networks for $900 million. And Juniper Networks,
another Avici challenger, went public this week and
is valued at $1.6 billion.
"Our view was that some of the basic ground rules
had changed," Chadwick says. "We felt that being
closely aligned with Nortel limited our ability to work
with some customers who had other people as their
lead equipment vendors."
As far as the Bay acquisition, Chadwick says Nortel
was distracted with integrating that company's
personnel and product lines with its own.
"They had a number of architectures that they were
dealing with in the marketplace," Chadwick says.
"That gets very difficult to do as you progress
forward."
"This just opens us up to more easily pursue our
plan to remain independent and go public," he
adds.
Nortel, meanwhile, says the decision to sever the
marketing and distribution arrangement with Avici
was mutual. Nortel recently unveiled a high-speed
router for service providers - the 240G bit/sec
Versalar 25000 - and has other internal
developments underway that can scale the Versalar
platform to hundreds of terabits, says Arun Jain,
Nortel director of marketing for carrier routing
products.
Nortel will unveil some of these developments within
the next several weeks, Jain says.
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