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Nortel buys Xros for $3.25B
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March 14, 2000: 4:49 p.m. ET
Deal gives telecom gear maker ability to develop first all-optical network
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NEW YORK (CNNfn) - Nortel Networks agreed Tuesday to acquire Xros, a maker of high-tech gear that helps transmit data using light, for $3.25 billion in stock, accelerating its attempts to produce the world's first all-optical online network.
The addition of Xros' technology gives Nortel (NT: Research, Estimates), the No.2 telecom equipment maker, the capacity to handle future optical Internet speeds of up to 80 gigabits per second, capabilities the company previously said it would introduce next year.
It also brings the Brampton, Ontario-based Nortel one step closer to winning the race to develop the world's first functional optical Internet network that transmits data at high speeds using light instead of electricity.
"An all-optical Internet will deliver millions of instant Internet sessions, thousands of video channels and vast amounts of e-business transactions on an unprecedented scale," said Clarence Chandran, president of Nortel's service provider and carrier group. (472K WAV or 472K AIFF)
Chandran told CNNfn that the basis of Xron's optical technology is a system of mirrors rotating on different axes. Photons from a fiber-optic cable hit one mirror, are directed to another mirror and then out to the network.
Nortel can't satisfy acquisition appetite
The deal extends an acquisitive run for Nortel, which has been in a race with Lucent Technologies (LU: Research, Estimates) and Cisco Systems (CSCO: Research, Estimates) to develop a high-speed network able to handle voice, data and video transmissions at the same time.
In the last three months alone, Nortel, which already handles 75 percent of the North American Internet backbone traffic, also agreed to acquire optical networking company Qtera and digital subscriber line developer Promatory to help bulk up its network and products.
Chandran told CNNfn that Promatory fits into its view of increasing velocity on the edge of the network and that Nortel will continue to pursue companies that will help with that goal. (268K WAV or 268K AIFF)
At the same time, like Lucent and Cisco, Nortel is divesting its consumer and commodity businesses, and said earlier this month it will shed its Netgear subsidiary, a maker of home networking gear.
The company has been reallocating those resources into accelerating its development of optical systems, an effort further boosted by the acquisition of Xros, a four-year-old company whose products help eliminate "virtual bottlenecks" on optimal networks.
The agreement comes as the Sunnyvale, Calif.-based Xros is preparing to roll out its X-1000 switch, which recently was named "Best of Show" at the annual Optical Fiber Communications conference. Analysts project the world market for optical bandwidth management systems will grow to $15 billion by 2004.
Nortel shares rose 3-11/16 to 125-3/8 shortly after the opening bell on Wall Street Tuesday. 
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Nortel Networks Corp.
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