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Nortel Sells off Alteon Assets to Radware

Bankrupt networking giant Nortel is moving into a new realm of its Chapter 11 reorganization. After cutting costs and reducing staff, it's putting assets on the block.

The company announced that is it selling off parts of its layer 4 through 7 product portfolio, which deals with the application awareness side of networking. Nortel acquired the product lines in 2000 when it bought Alteon WebSystems.

Radware and Nortel did not disclose the sale price. As well, spokespersons contacted by InternetNews.com from both Nortel and Radware decline to provide financial specifics. Nortel expects the deal to close in the second quarter of 2009.

The sale of the Alteon product lines comes as Nortel continues to fight its way out of bankruptcy protection and focus on the areas of its business where it feels it can still grow.

Nortel is required under bankruptcy provisions to seek the highest bid possible for assets as it restructures its debts and obligations.

"I believe it's [as] fair as we made it," Radware COO IIan Kinreich told InternetNews.com.

Radware is expected to assume the ownership of the Alteon product lines while maintaining an OEM relationship with Nortel.

The products in the deal include Nortel's Application Accelerators (NAA) 510 and 610, and Nortel Application Switches (NAS) 3408E, 2424E, 2424 SSL E, 2216E and 2208E.

Additionally, the deal will see Nortel shedding its Virtual Services Switch (VSS) 5000, which was released in April of 2008. The VSS 5000 is a Linux-based virtualization optimized networking switch for which Nortel had high hopes when it was first released.

A source familiar with Nortel told InternetNews.com that, to date, the VSS 5000 has not had good traction and had not sold particularly well.

While virtualization generates a lot of media hype and buzz these days, the actual enterprise reality is sometimes a different matter.

"Virtualization is something people are talking about," Kinreich noted. "As for the actual deployments, these are moving at a slower pace."

Radware does see opportunity in virtualization. Kinreich noted that his company will make sure that product offerings fit into virtual environments and be careful to ensure the right timing for product releases.

As for what Kinreich sees as the potential for the Alteon product line, he's also optimistic.

"This market is expanding, even though the overall climate right now puts in some uncertainty," Kinreich said. "There is a need in data centers, in telecom, in carriers and in enterprises for these kind of solutions and I believe that the need will carry on."

IDC analyst Abner Germanow sees the deal as one with upside for both Nortel and Radware.

"Nortel [gets] an OEM agreement with Radware, which will keep existing customers supported and hopefully with a logical upgrade path over time," Germanow told InternetNews.com

"Radware gets a book of business that includes both enterprise and service provider customers. Historically, more pure play Layer 4-7 vendors such as Radware and F5 have fared better in this market as the sales process and customer set is often fairly different from a Layer 2-3 Ethernet switch sale."