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

To: jack bittner who wrote (5039)	3/15/2000 6:56:00 AM
From: Glenn McDougall	Respond to of 14638

Nortel snags another tech firm $3.4-billion purchase to help battle Lucent globeandmail.com TYLER HAMILTON Technology Reporter Wednesday, March 15, 2000 Nortel Networks Corp. is spending about $3.4-billion (U.S.) in stock for a small Silicon Valley firm that makes advanced high-speed switches, plugging the final major hole in its line of fibre-optic networking gear. Canada's largest technology company will pay what executives are calling a "very fair price" for Sunnyvale, Calif.-based Xros Inc., a four-year-old startup with 90 employees and no revenue. Nortel will issue about 27.5 million shares to finance the deal, which will be "slightly dilutive" to 2000 earnings. The acquisition is expected to close within the next three months, and the company said it will begin boosting profit in 2001. Clarence Chandran, president of Nortel's service provider and carrier group, said there will be more than a billion Internet users by 2005, and Xros's optical switches represent the ability to manage that traffic. Large telecommunications and Internet carriers are expected to embrace next-generation optical networking equipment from companies such as Nortel. The technology lets carriers significantly boost the capacity of their networks while reducing the costs. "We're now all-optical in the infrastructure," Mr. Chandran said. "We have the key products in place." Nortel's stock rose $3.30 (Canadian) yesterday to $181.10 on the Toronto Stock Exchange, where it was the fourth most actively traded stock in Canada. Analysts said Xros is the last major piece of Nortel's optical networking puzzle, and that the Brampton, Ont.-based company needed the small startup to stay competitive with rival Lucent Technologies Inc. of Murray Hill, N.J. "They need to make this acquisition," said Richard Woo, an analyst with Thomson Kernaghan & Co. in Montreal. "Lucent will have their product ready for volume shipment in the third quarter of 2000. Nortel was missing this piece, but now they have it." Xros's "micro-mirror" router -- also referred to as a "photonic" switch -- uses thousands of tiny mirrors to reflect light pulses sent through fibre-optic lines. The router both manages and directs data traffic -- be it video, voice or text-based -- and prevents the cost of turning light pulses into electronic signals whenever traffic needs to be rerouted. Lucent released a similar technology in November called the LambdaRouter, but Mr. Chandran said the Xros product has a greater ability to "scale up" as demand for Internet services increases and high-speed networks are upgraded to handle more traffic. Given this, he estimated that Nortel has a nine- to 12-month lead over its competitors. Yesterday, Lucent announced it was buying the remaining 44 per cent it doesn't own in Ignitus Communications LLC, an Acton, Mass.-based firm that makes high-speed optical access equipment. Greg Reznick, chief executive officer of Xros, said his company has been developing its photonic switch technology for more than five years. The company raised $25-million (U.S.) in private financing in 1999. While Xros currently has no revenue, Nortel expects the product will begin shipping in the first quarter of next year. Until then, Nortel will spend the summer conducting customer trials. "We've had no shortage of interest from carriers in any space wanting to trial this [technology]," Mr. Reznick said. "We're getting interest from all fronts." In December, Nortel's stock purchase of Boca Raton, Fla.-based Qtera Corp. -- worth $3.25-billion -- gave it the ability to optically transmit huge amounts of data over longer distances without having to electronically regenerate the signal. As a rule, less regeneration equipment means less cost for the carrier. "The goal is to get rid of electronic regeneration," said Mr. Woo, the analyst. He said both Qtera and Xros help Nortel achieve that goal, meaning Nortel customers will eventually "save millions in costs." Charles Disanza of Gerard Klauer Mattison & Co. rated Nortel's stock a "buy" yesterday. NORTEL TAKES STOCK Dec. 3, 1997: CEO John Roth announces Webtone strategy to develop new products for the Internet. March 18, 1998: Acquires Aptis Communications Inc., which makes high-speed remote-access Internet gear for $300-million (U.S.). June 15, 1998: Merges with Bay Networks Corp. in $7-billion (U.S.) deal to assault data network market. Dec. 9, 1998: Buys Cambrian Systems Corp., from rival Newbridge Networks Corp. for $300-million (U.S.). April 13, 1999: Buys Internet service provider equipment maker Shasta Networks Inc. for $340-million (U.S.). Oct. 18, 1999: Nortel buys Clarify Inc. for $2.1-billion (U.S.) in stock. Dec. 15, 1999: Nortel to acquire Qtera Corp. of Florida for $3.25-billion (U.S.) in stock. Jan. 6, 2000: Nortel to buy Promatory Communications for $778-million (U.S.) in stock. March 14, 2000: Nortel to buy Xros Inc. for $3.4-billion (U.S.) in stock.