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

To: Stocker who wrote (5444)	4/20/2000 10:37:00 PM
From: Kenneth E. Phillipps	Read Replies (1) \| Respond to of 14638

Article in the National Post explains the significance of the Architel acquisition - facilitates the activation of DSL links Nortel pays $395-million for Toronto software maker DSL technology Michael Lewis Financial Post Nortel Networks Corp. yesterday announced its fifth acquisition in as many months, an all-stock deal valued at $395-million (US) for Toronto software maker Architel Systems Corp. Brampton, Ont.'s Nortel said it is acquiring Architel largely to incorporate technology that automates the activation of Internet service over telephone lines. It said the Architel system is the best of its class, and can reduce the amount of time it takes to connect consumers to the Net from weeks to minutes. Activating digital subscriber links (DSL) is currently a labour- and time-consuming process for Nortel's telephone company customers -- requiring the manual switching of various network pieces into activation mode. Adding the Architel software to Nortel's Preside line of Internet service products means the firms can automate the switching process to reduce waits for customers -- and to generate revenue sooner for the carriers, Nortel said. Architel and telecommunications networking firm Nortel have been alliance partners since late last year, but the two said they agreed to the purchase transaction in order to pursue better a rapidly expanding market. For Architel shareholders, the deal represents something of a second-best result after a $609-million takeover offer from St. Louis, Mo.-based Amdocs Ltd. fell through last year when Architel lost it biggest client. Architel says the problems that led it to withdraw from a major installation and consulting project, triggering the account loss, have been largely addressed. Still, the firm continues to experience "susceptibility to a lumpy sales pattern," said Stuart Griffith, chief executive. That was apparent in Architel's second-quarter result, also announced yesterday. Architel lost $3.57-million, (23½ per share) on revenues of $17-million, compared to a deficit of $8.3-million, (55½) on sales of $15.5-million in the year-earlier period. It's the fifth-consecutive quarter that the company has either posted a loss or broke even. Nortel, meanwhile, said the two companies have agreed to so-called collar provisions to hedge against excessive share price volatility. Architel shareholders are guaranteed a minimum value of $83.81 for each Nortel share acquired when the deal closes, likely in the third quarter. If the value of Nortel common shares falls below $83.81 (US) on the day the deal closes, Nortel will pay $17.60 (US) in Nortel common shares for each share of Architel. If the value of Nortel shares is above $125.71 (US), the company will pay $26.40 (US) in common shares for each Architel share. The provision provides a cap and ceiling range 20% above and below Nortel's $104.75 (US) share price when the acquisition arrangement was signed. The provision sets out a range of value for the deal from a minimum $304-million (US) to $395-million (US), depending on the price of Nortel shares on closing day. Nortel will issue about 3.63 million common shares on a fully diluted basis to cover the purchase. With recent price share declines, the owners of private companies acquired by Nortel this year could receive less than previously announced for their shares. In this context, the upper-lower range was applied to "reflect the volatility we're seeing in the marketplace today," a Nortel spokesperson said. Shares in Nortel closed in Toronto yesterday at $155.50, a drop of $4. Architel stock jumped by $7 to $30.43. The transaction is expected to be neutral to Nortel's earnings per share in 2000 and will add slightly in 2001, excluding acquisition-related charges. If the deal is not consummated, Nortel will receive a termination fee of either $12-million (US) or an option to acquire a 19.9% common share stake in Architel. nationalpost.com