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Nortel Buys Optical Network Firm for $1.43 Billion

Nortel Networks continued the buying spree it began last week Tuesday, acquiring privately-held optical component firm CoreTek for $1.43 billion in stock.

Based upon a Nortel Networks share price of $119.75, the optical Net firm will issue 8.9 million common shares on a fully diluted basis at closing. Up to an additional $361 million in common shares would be issued upon CoreTek achieving certain milestones.

Nortel (NT) will incorporate CoreTek's solutions, which use tiny, movable mirrors to alter the wavelength of light emitted by semiconductor lasers and other optical components. CoreTek's devices are designed to allow networks to change the wavelength of light in real-time as it travels through a network, giving the network the flexibility to dynamically monitor and re-route traffic. This ability helps boost the speed, performance, quality and economics of the optical Internet.

Designed to operate in 10 gigabits per second systems, Coretek's products will add to the speed and quality that Nortel has branded as the standard for today's optical Net, with plans to evolve to operate in 40 Gbps and 80 Gbps systems. CoreTek's chief executive officer, Dr. Parviz Tayebati, will drive the development of CoreTek's technology within Nortel.

In addition, CoreTek's technology will complement Nortel's acquisition of Xros for $3.25 billion, sealed last Tuesday. Xros is a privately-held switching firm that manufactures photonic switches, which allow data to be switched through optical networks in the form of light.

"We will continue to move at Web-speed and employ a mix of alliances and acquisitions to answer the ever-growing bandwidth demands of our customers while at the same time exponentially driving down the cost of delivering services and driving up profitability," said Clarence Chandran, president of Nortel's service provider and carrier group.