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Nortel in new optical deal
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March 21, 2000: 9:26 a.m. ET
Firm acquires CoreTek for $1.43B in stock; 4th purchase since December
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NEW YORK (CNNfn) - Nortel Networks agreed Tuesday to acquire optical component maker CoreTek for $1.43 billion in stock, extending a recent shopping spree that has seen the No. 2 telecom company add four small high-tech companies in the last three months.
The deal for CoreTek, based in Wilmington, Mass., significantly enhances Nortel's production of optical components, particularly those that operate at a speed of 10 gigabits per second, the speed Nortel currently operates its online optical Internet.
It also accelerates Nortel's pace in the race with Lucent Technologies (LU: Research, Estimates) and Cisco Systems (CSCO: Research, Estimates) to develop a high-speed optical network able to handle voice, data and video transmissions at the same time.
Prior to this deal, Nortel (NT: Research, Estimates) already had announced it would invest $660 million to increase production capacity for its own optical networking and components business. CoreTek components use tiny, movable mirrors to alter the wavelength of light emitted by semiconductor lasers, allowing networks to monitor and re-route traffic.
Final price contingent on 'milestones'
Tuesday's agreement calls for Brampton, Ontario-based Nortel to issue roughly 8.9 million of its shares on a fully diluted basis to closely held CoreTek. An additional $361 million of Nortel shares will be issued at the transaction's closing, assuming CoreTek achieves certain milestones.
Company officials would not disclose what those milestones were, saying only that they were "standard business performances."
Nortel expects the deal to be "marginally" dilutive to its earnings per share this year and accretive next year. The companies hope to complete the transaction during the second quarter.
Nortel, which currently handles about 75 percent of the North America Internet backbone traffic, has been actively acquiring a host of small, high-tech companies recently in its race to construct the nation's first all-optical Internet that uses light to transmit data instead of electricity.
Last week, Nortel agreed to acquire Xros, a maker of high-tech gear that helps transmit data using light, for $3.25 billion in stock. Previously, it also agreed to acquire optical networking company Qtera and digital subscriber line developer Promatory to help bulk up its network and products.
Nortel shares lost 2-9/16 in trading Monday to close at 126-3/16. 
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Nortel Networks
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