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To: Doug who wrote (15896)	12/16/1999 2:10:00 PM
From: larry pollock	Respond to of 18016

Optical networking, the wave of the future- Thursday, December 16, 1999 Merger Mania Nortel's move seen as expensive but unavoidable Qtera holds the key By JILL VARDY The Financial Post OTTAWA - Nortel Networks Corp.'s purchase of Qtera Corp. for $3.25-billion (US) in stock is a defensive move to prevent Nortel from losing its number-one spot in the booming market for optical networks, analysts say. And while some say Nortel is paying too much for Qtera, a company that has never reported sales, most agree it's crucial that Nortel beef up its war chest of optical technology if it wants to continue beating such giants as Cisco Systems Inc. and Lucent Technologies Inc. "Going out and buying technology isn't a crime. Cisco has made an art of it. But paying $3.25-billion for a company with no sales is a valuation that a lot of people have a tough time wrapping their heads around," said Robert MacLellan, technology analyst at CT Securities Inc. "By any rational definition of market valuations Nortel overpaid. But I don't think it's going to matter. It's a defensive move that can't be avoided." Media reports said Cisco in fact did make a bid for Qtera, but lost out to Nortel's higher offer. Qtera, according to the reports, preferred Nortel because it is considered the top-maker of fibre-optic network equipment in North America. Qtera, a private company that has been very secretive about its technology, is thought to hold the key to make optical networks work more cheaply across longer distances. A signal is sent over an optical network in a beam of light. But every couple of hundred miles, the light signal must be converted back to electricity, cleaned up and re-amplified to make it to the next junction in the network -- a process known as OEO (optical-electrical-optical) processing. "That slows the network down. and every time you touch a packet of data you run the risk of introducing errors," said Mr. MacLellan. "Ideally, you'd have transit from source to destination without ever having to convert the light signal to electricity. That's still a few years down the road." Qtera's technology has been proven in trials by Qwest Communications International Inc. to send an optical signal across the U.S. with little or no regeneration. That's half the battle. The other more difficult half is developing routers and switches that will easily redirect optical signals without having to convert them back into electricity. Nortel is working on such technology, as is every other large telecommunications vendor. For example, Sycamore Networks Inc. already has an optical switching platform and real revenue -- it recently signed a $400-million (US) deal with Worldcom Inc. to supply optical routers. Lucent is working on similar technology, as is Ciena Corp. Cisco has taken equity stakes in half a dozen optical startups such as Corvis Corp., considered an arch-rival to Qtera. "I fully expect Cisco will acquire Corvis or Ciena by the end of next year," Mr. MacLellan said. "I wouldn't be surprised if Lucent is knocking on Corvis' door as well." In the cutthroat market for telecommunications equipment, all the major networking firms are frantically trying to keep up with new innovations. Signs that any firm may be losing share prompts a stampeded from its stock. For example, Cisco shares fell more than 7% in early trading yesterday after the company's quarterly filing with the Securities and Exchange Commission warned that its profit margins may erode in future quarters. Cisco has made the same warning in regulatory filings that date back to October, 1996, a common practice to avoid lawsuits if quarterly sales do fall in future. In fact, Cisco's sales have grown rapidly for seven straight quarters. While all the carriers are evaluating optical networking technology, it's still early for large-scale commercial network rollouts. But they know they're going to need to be ready when customers are convinced optical networking is the wave of the future. Top Stories Holiday season starts well for retailers JDS Uniphase to invest $125M, mostly in Ottawa Canada trade surplus recovers slightly in October WestJet stock soars on expansion plans

To: Doug who wrote (15896)	12/16/1999 2:25:00 PM
From: zbyslaw owczarczyk	Read Replies (1) \| Respond to of 18016

QTERA had to be aquired quickly where NN not. If NT wants to merge with NN they know NN will not go with CSCO, where QTETA could. I did not realized that that BT,SBC and others agresive movment into ATM space is so out of reality. Networks needs many element including optics,ATM, IP ,IP over ATM. YOu seems to see only one of them, based on hot starup. I would suggest to look what carries are doing, b/c they ultimetly dictate what will be sold. So far ATM in US and EU is growing very fast. Talk to industry people, not only read hot news. BTW, how many companies can be aquired which make state of art ATM platform - one. How you know if NT is taking to NN or not. Fact that optics is hot, does not mean there is something wrong with ATM. One does snot preclude another. We are leaving in the real world, where IP/ATM ond optics will dominate core networks and optics, simple speaking needs ATM ofr QoS and manageability. Z.O: The market seems to believe them more than NN. If you aretalking about financial market, they do not dictate the trand where industry is going, they use it for its own reason, quite offten market can not see big picture. And NN did never day that optics is bad and only ATM is good. You statement that Z.O: The market seems to believe them more than NN. is suggesting this and I do not know where did you hear that. Zbyslaw

To: Doug who wrote (15896)	12/16/1999 2:34:00 PM
From: zbyslaw owczarczyk	Read Replies (1) \| Respond to of 18016

"Media reports said Cisco in fact did make a bid for Qtera, but lost out to Nortel's higher offer. Qtera, according to the reports, preferred Nortel because it is considered the top-maker of fibre-optic network equipment in North America." Doug , where is bidding war, the price go very high. CSCO does not bet to much on ATM but LU is betting. CSCO on the other had has good track record in following others nad executing in corporsate space but not forseen what is coming. In carrier space they track record is very bad. So Qtera went with NT. Zbyslaw Zbyslaw