RealTime IT News

Nortel Nabs Net Communications Firm

Nortel Networks Corp. Tuesday fired the latest round in the acquisition war with the purchase of privately-held Sonoma Systems for $540 million in stock.

Based on a $78.13 price per Nortel common share, the transaction would result in Nortel issuing approximately 6.9 million common shares for the shares of Sonoma Systems. An estimated $480 million will be paid in common shares at closing on a fully diluted basis. Up to an additional $60 million in common shares is payable subject to the fulfillment of certain business performance objectives in the first year after closing.

The deal is expected to close in the fourth quarter.

Sonoma, which offers high-speed video, data and voice communications via the Net, will help Canada-based Nortel blend its optical Internet technology with every-day Internet service. This will allow service providers to deliver high-speed broadband content to their business customers.

The two firms already enjoyed strong ties as Sonoma had previously agreed to incorporate its network management technology into Nortel's products. Sonoma's products also integrate as an edge device with Nortel's OPTera-Metro solutions, which was demonstrated in June 2000 at Supercomm in Atlanta.

Analysts claim such broadband services are on the verge of exploding. The Yankee Group estimates that the market for delivering these carrier-managed services will reach more than $18 billion globally by 2002, up from $10 billion this year.

For Nortel, the No. 2 network behind Cisco Systems Inc., the deal puts another firm under the company's belt to step closer to complete optical networking solutions, an arena in which Cisco currently has the greatest pull.

Two weeks ago, Nortel countered strikes by networking rivals Cisco and Lucent Technologies Inc. by grabbing content switch giant Alteon WebSystems Inc. for $7.8 billion in stock.

Nortel had sat quietly that week as Lucent bought network switching supplier Spring Tide Networks for $1.3 billion in stock and Cisco countered with the purchase of data storage network NuSpeed Internet Systems for $450 million in stock.

Gregory Koss, president and chief executive officer of Sonoma Systems, said he believes Nortel is leading the high-performance Internet charge. He feels Nortel's brand will cause Sonoma's presence to balloon.

"Sonoma Systems integrated access solutions will extend Nortel Networks leadership in the Local Internet, giving service providers the infrastructure to deliver high-performance Internet and converged services to business customers of all sizes, while allowing Sonoma Systems to leverage Nortel Networks market presence, resources and sales channel around the globe," Koss said.

Sonoma's clientele includes smaller service providers such as SAVVIS Communications and Electric Lightwave.