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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Henry D. who wrote (4179)	1/7/2000 6:28:00 AM
From: uel_Dave	Read Replies (1) \| Respond to of 14638

Nortel pays $778M U.S. for tiny DSL star Deal is sixth major acquisition in past year for Canada's tech giant James Bagnall The Ottawa Citizen Nortel Networks Corp. is intensifying a two-year-long buying binge, helped in large part by stock that continues to be richly-valued despite recent setbacks. The Brampton-based communications equipment-maker said yesterday it would pay an estimated $778 million U.S. for Promatory Communications Inc., a Fremont, California-based company that was founded only four years ago and generated less than $1 million U.S. in sales last year. Promatory specializes in digital subscriber line (DSL) technology, which is used to expedite Internet access over standard telephone lines. Promatory president Roger Dorf says his firm's main product allows anyone with a telephone connection to receive voice, data and video services at the rate of eight million bits per second, more than 140 times faster than the 56-kilobit-per-second modems now commonly in use. It's the sixth major acquisition for Nortel in the past 12 months, during which it has spent $7 billion U.S. Nearly 90 per cent of this spending spree has occurred since October. However, Nortel is paying for these acquisitions with shares, whose price has more than tripled since the beginning of 1999. In other words, the relative cost of buying these firms isn't that onerous. For example, Nortel is paying the equivalent of 0.6 per cent of its market value for Promatory. In return, it gains what it believes to be one of the leaders in a new market poised to take off. Dell'Oro, a U.S.-based consulting firm, estimates that telephone companies and other service providers will boost the number of DSL lines in service to 2.1 million this year, up 156 per cent from 1999, and add another 5.5 million lines by 2002. Nortel is a long way from having the field to itself. Lucent Technologies Inc. of Murray Hill, New Jersey, is aggressively marketing similar technology. Copper Mountain Networks Inc., a Palo Alto, Calif.-based firm that went public last May, claims a global lead in the burgeoning DSL market, especially in the niche aimed at businesses. Catena Technologies Inc., a Kanata startup with ambitions of becoming a major player in copper-wire access technologies, expects to unveil soon in detail its own version of DSL technology. "The Promatory acquisition is good news because it validates our approach to this market," said Catena president Jim Hjartarson. Steve Schilling, the president of Nortel's Access Networks unit, appeared to acknowledge Copper Mountain's early lead during a telephone conference call, noting that Nortel would be trying to steal away some of its customers. Nortel would distinguish itself, he added, by blending Promatory's technology with Nortel's other access and networking technologies. Nortel is keen to boost the speed at which homes and businesses can access the Internet for the simple reason that this will accelerate demand for many of its other networking products. For example, a sharp increase in digital traffic generated by Web surfers inevitably increases the need for fibre-optic and other technologies inside the giant networks operated by Bell Canada or MCI Worldcom. Nortel shares closed yesterday at $84 on the New York Stock Exchange, down $5 7/8 on the day. The decline reflected a weakness in technology stocks generally -- the Nasdaq exchange was down nearly four per cent. Further drops might be in store today. Nortel's archrival Lucent surprised analysts yesterday following the close of markets with the revelation that it would fall short of revenue and earnings' estimates for its second fiscal quarter ended Dec. 31. The main culprit, according to Lucent, was unexpected delays in deployments of networks being built by large corporations and service providers. Investors will be watching Nortel very carefully for signs that its big customers are still rolling out major-league networks. If Lucent's weakness spreads, then all aspects of networking technology -- even the supposedly hot DSL niche -- will have to be re-appraised by analysts and investors alike. Nortel Acquisitions Date Company HQ Price paid Technology (Millions U.S.) 06/01/00 Promatory Freemont, $778 xDSL access Communications Inc. California 15/12/99 Qtera Corp. Boca Raton, $3,250 long-haul fibre-optic Florida 18/10/99 Clarify Inc. San Jose, $2,100 customer relations California software 24/08/99 Periphonics Corp. Bohemia, $436 call centre New YorK 20/05/99 X-CEL London, N.D. network Communications Inc. England performance software 13/04/99 Shasta Networks Inc. Sunnyvale, $340 Internet Protocol California services 09/12/98 Cambrian Systems Corp. Kanata $300 metropolitan fibre-optic N.D. Not disclosed