Nortel Adds to High-Speed Net Access Gear
By Cindy Christ

Canada's Nortel Networks (NT) said Thursday it was acquiring Promatory Communications, a privately held developer of Digital Subscriber Line technology, for an estimated $778 million in stock.

A Nortel supplier, Fremont, Calif.-based Promatory develops technology allowing ordinary copper telephone wires to carry Internet traffic at speeds of up to eight megabits per second, 150 times faster than conventional dial-up modems.

"The addition of Promatory's next generation DSL platform to Nortel Networks leading first-mile access solutions…will allow us to make high-speed Internet access a reality for homes and businesses everywhere," said Clarence Chandran, executive vice president and president of Nortel Networks Service Provider and Carrier Group, in a statement.

Promatory's DSL gear will also enhance Nortel's ability to offer Web-based telephony, allowing Internet service providers to offer consumers voice and Internet services simultaneously over the same copper wire, the company said.

The transaction, which must be approved by regulators, is slated to close in first quarter 2000.

Nortel will pay an estimated $705 million in common stock, with the remaining $73 million contingent on Promatory's reaching certain performance targets in 2000.

Based on the market value of its stock in a specified period prior to closing, Nortel will issue between 6.3 and 9.4 million shares to make the acquisition, which will add to earnings in calendar year 2000.

Nortel competes with rivals Cisco Systems, Lucent Technologies, Alacatel and Redback Networks in the DSL arena.

The deal comes on the heels of Nortel's acquisition of Qtera Corp. in December, a move aimed at extending its lead in the red-hot optical networking space.

Nortel said the DSL market is set to take off, projecting seven million DSL lines in service by 2002, compared with fewer than one million today. By 2003, the market is expected to rise to $4 billion, almost 40 times last year's estimated total of $103 million.

Launched in 1996, Promatory employs about 100 workers, including 85 in Fremont and at sales offices around the U.S. and in the UK and Singapore. Promatory president Roger Dorf will become vice-president of a new Nortel Networks business unit.

Shares in Nortel Networks declined on news of the acquisition, closing down $4.88, or 5.4 percent, to $85.