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To: Earthdog who wrote (6398)	6/10/1998 8:13:00 PM
From: Anthony Wong	Respond to of 6980

Nortel May Buy More Small Networking Firms, CEO Says (Update3) Bloomberg News June 10, 1998, 4:55 p.m. ET Nortel May Buy More Small Networking Firms, CEO Says (Update3) (Updates with closing share price in 10th paragraph.) Atlanta, June 10 (Bloomberg) -- Northern Telecom Ltd., the second-largest maker of phone equipment in North America, wants to buy small data-networking companies to improve its products for carrying Internet traffic, Chief Executive John Roth said. Roth declined to comment on speculation that Northern Telecom may buy network-equipment maker Bay Networks Inc., though he said smaller companies are easier to integrate with Northern Telecom. Bay shares have risen about 30 percent in the past two months, driving its market value to $6.7 billion. Northern Telecom is racing against rivals Lucent Technologies Inc., the largest U.S. phone-equipment maker, Alcatel Alsthom SA of France and others to help phone companies keep up with mushrooming data traffic. Nortel is looking at companies that would give it high-capacity routers and other products for directing and carrying Internet traffic, Roth said. ''Our whole drive is to become a stronger player in (Internet) networks,'' Roth said in an interview at the Supercomm trade show in Atlanta. ''We continue to look at smaller firms; they're easier to digest.'' Cisco Systems Inc. sells more than 80 percent of the routers bought by large corporations, yet its market capitalization of about $83 billion makes it an unlikely takeover target. Other small, closely held companies also are developing powerful routers, including Avici Systems Inc., Juniper Networks Inc. and Pluris Inc. Northern has a minority stake in Juniper and in April agreed to acquire a 20 percent stake in Avici. ''If they intend to be a strong data-communications player, they will have to purchase somebody,'' like Juniper or Avici, said Craig Johnson, an analyst with the PITA Group in Portland, Oregon. Big Companies, Too Still, Roth wouldn't rule out an acquisition of a larger, more established networking-equipment maker like Bay. Brampton, Ontario-based Northern Telecom is interested in products for networks that use Internet protocol, or IP, technology that transmits information in small pieces, allowing several calls to be carried at once. The company isn't looking at makers of asynchronous transfer mode, or ATM, switches and other products that it already has expertise in, Roth said. Such a strategy would rule out Ascend Communications Inc. and Fore Systems Inc., which both have broad ATM product lines. Northern Telecom rose 1/16 to 65. In the past year, the company acquired closely held Aptis Communications Inc. for about $305 million and Broadband Networks Inc. for about $400 million, and purchased smaller stakes in Plaintree Systems Inc. and others. ''We've been investing in about one high-tech company a month,'' Roth said. Separately, the executive said sales in Europe are expected to rise more than 10 percent this year as new phone companies enter the recently deregulated market. Last year, European sales, which account for more than 20 percent of Northern Telecom's total revenue, rose 15 percent to $3.5 billion. --Andrew Brooks in Atlanta with reporting by John Shinal through