Nortel’s Blades Business Finds a New Home

Nortel is getting out of the market for blade switches. The Toronto-based
telecom giant is selling the assets of its Blade Server Switch Business Unit
(BSSBU) to Garnett & Helfrich Capital. Nortel plans to keep a minority
interest in the newly formed Blade Network Technologies.

Equity firm Garnett & Helfrich said Blade Network Technologies will be
based in Santa Clara, Calif., and headed by president
and CEO Vikram Mehta who had led Nortel’s blade server switch business from
its inception in 2001. Terms of the deal were not disclosed.

“From our standpoint we’re in the business of doing venture buyouts with
dramatic growth opportunity, and this is the prototype of what we were
seeking,” David Helfrich managing director of Garnett & Helfrich told

“We see this as a business better served as a
standalone business that could realize dramatic growth with defensible
technology, generous funding and a hundred percent focus on a target

Blade Network Technologies assumes management of Nortel’s BSSBU
operations, including design, manufacturing and support of existing BSSBU
blade server switches.

In addition, certain products supplied by Blade
Network Technologies will carry the Nortel brand or the
“Solutions by Nortel” brand. Nortel also had a blade research center in
Canada, which will become an R&D center for Blade Network as part of the deal.

Blade Network continues the relationships established by Nortel as a
supplier of switches to the top two leading blade suppliers IBM and HP . Cisco
is the main competitor Blade Networks faces in the switching area.

“We think we have an inherent advantage being a company focused one
hundred percent on the blade server market without the inherent conflicts and
restrictions others have,” said Mehta.

Blade Networks hits the ground running as a new company. Nortel’s blade
server switches are installed and used by Fortune 500 companies across 25
different industry segments.

The new company will be one of the largest
suppliers of blade server switches with an installed base it said includes
52,000 switches (representing approximately 1.1 million Gigabit Ethernet
ports) around the world.

According to IDC research, blade server shipments will grow at a compound
annual growth rate of 57 percent through 2009 to reach $10 billion, making
blade servers the fastest growing segment within the server industry.

This is the third big venture buyout deal for Garnett & Helfrich Capital
following Wyse Technology (thin-client computing) and Ingres (open source
enterprise database company spun out from Computer Associates).

Helfrich, managing director of Garnett & Helfrich Capital, becomes chairman
of Blade Network Technologies’ board of directors. Eric Schoch, vice
president of business development, Nortel, is now also a board member at

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