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.

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