Nortel to buy Promatory for up to $778 million
TORONTO . Jan 06 (Reuters) - Nortel Networks Corp. (nyse: NT), one of the world's largest communications equipment makers, said Thursday it will buy venture capital-backed Internet communications services firm Promatory Communications Inc. for up to $778 million in shares.
Promatory, based in Fremont, California, offers digital subscriber line (DSL) platforms that allow high-speed Internet access of up to eight megabits a second -- or 150 times the speed of old-style analog modems -- over ordinary copper telephone wires.
Nortel said the acquisition will add slightly to earnings per share in 2000, prior to acquisition-related charges. The number of shares Nortel will issue, which will be between 6.3 million and 9.4 million, will be based on the average price of its stock during a specified period prior to closing.
The all-stock deal, which is expected to close in the first quarter, is conditional on regulatory approvals. Nortel said it will pay $705 million of the purchase price on closing with an additional $73 million payable subject to Promatory fulfilling certain business performance objectives this year.
"The industry has been waiting for a true broadband Internet access solution over copper, one that delivers high-speed service for the user and a profitable business model for the service provider," Clarence Chandran, president of Nortel Networks Service Provider and Carrier Group, said in a statement. "The addition of Promatory's next generation DSL platform to Nortel Networks leading first-mile access solutions, combined with the Optical Internet, Internet telephony, and Nortel Networks services and applications will allow us to make high-speed Internet access a reality for homes and businesses everywhere."
Nortel said the DSL market is poised to accelerate with analysts predicting seven million DSL lines in service by 2002, up from a level of fewer than one million today. "By 2003, the market is expected to rise to $4 billion, almost 40 times last year's estimated total of $103 million," Nortel said.
Promatory was founded in 1996 and has about 100 employees, including 85 in Fremont and sales offices in the United States, Britain and Singapore. Promatory President Roger Dorf will become vice president of a new Nortel Networks business unit. |
