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more reason for merger to go through. more competition!
The Wall Street Journal Interactive Edition -- March 22, 2000
Nortel Plans to Acquire CoreTek
For up to $1.43 Billion in Stock
By MARK HEINZL
Staff Reporter of THE WALL STREET JOURNAL
BRAMPTON, Ontario -- Nortel Networks Corp. agreed to pay as much as $1.43 billion in stock to
acquire start-up CoreTek Inc., in a continuing drive to acquire new technology to boost the capacity
of fiber-optic communications lines.
The acquisition would move Nortel further into the business of manufacturing optical-network
components and give it a lift in developing a prime product that could compete with the advanced
laser systems of component-industry leader JDS Uniphase Corp. Where JDS is strong in optical
components that are used in other company's gear, including Nortel's, Nortel excels at making
complex systems that speed data and manage traffic over fiber-optic networks.
Networking companies like Nortel have been paying heavily for
start-ups with promising technologies but no products. The goal is to
maximize the volume and speed of data that travel over fiber-optic
networks while reducing costs. Closely held CoreTek, Wilmington,
Mass., is developing specialized lasers that transmit light beams over
fiber-optic lines. CoreTek's lasers are tunable, which means they can
send many different wavelengths of light using fewer parts than
conventional lasers, Nortel said. CoreTek has 120 employees and is a
year away from full-scale manufacturing of its first product.
Although some of Nortel's 25,000 engineers are already developing
tunable lasers, the company said CoreTek's technology is at the forefront
of the industry and will sharply reduce Nortel's manufacturing costs. The
technology, which uses tiny mirrors to alter light wavelengths,
complements the mirror-based optical-switching technology Nortel
stands to gain from its agreement last week to acquire start-up Xros Inc.
of Sunnyvale, Calif., for $3.25 billion in stock, Nortel officials said.
But JDS Uniphase, San Jose, Calif., is on track to launch a laser similar to CoreTek's product at
about the same time, which promises to intensify competition between JDS and Nortel, said SG
Cowen Securities Inc. analyst Jim Kedersha. Ironically, Nortel is also JDS's second-biggest
customer, accounting for a substantial part of JDS's sales of optical components such as filters that
handle multiple wavelengths of light at the receiving end of a fiber. Nortel played down the rivalry. "I
don't worry too much about the competition with JDS," said Greg Mumford, president of Nortel's
Optical Networks division. "We may have some overlap in products, but we're not setting out to
basically compete with them head-to-head as a mainline focus of our business," he said.
JDS officials weren't available for comment.
Nortel is eager to nail down acquisitions while its stock remains one of Wall Street's favorites. Shares
of Nortel, which sold for about $25 at the start of 1999, were trading at $129.50, up $3.125, in 4
p.m. New York Stock Exchange composite dealings Tuesday.
Nortel's final purchase price for CoreTek depends on whether CoreTek hits certain targets. Though
the price tag is "a lot of money, Nortel has the currency" with its soaring stock, SG Cowen's Mr.
Kedersha said. CoreTek (www.coretekinc.com) is owned by its employees and a handful of
venture-capital companies, including Adams Capital Management of Pittsburgh and Oak Investment
Partners of Palo Alto, Calif.
Write to Mark Heinzl at mark.heinzl@wsj.com |
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