Nortel Acquires Australian Optical Component Maker
By Cindy Christ

Nortel Networks, the world's No. 2 telecommunications supplier, came closer Tuesday to delivering an all-optical Internet by purchasing the remaining two-thirds stake in Photonic Technologies for $35 million in cash.

Brampton, Ont.-based Nortel already owned about 33 percent of the privately held company, which makes optical components used in high-speed and Dense Wavelength Division Multiplexing (DWDM) networks.

Dramatic growth in data traffic fueled by the build-out of the Internet is driving demand for optical networks, which transmit data solely on wavelengths of light.

Using DWDM technology, operators can expand capacity on existing networks by splitting light into different colors and sending multiple data streams over a single strand of fiber.

According to research firm RHK, the optical components market is expected to grow 37 percent per year to $23 billion in 2003 from $6 billion last year.

Nortel said Photonic Technologies products will speed up its lead as the industry moves from transmission speeds of 10 gigabits per second to 40 to 80 Gbps.

"This acquisition brings to Nortel Networks another disruptive technology which will enable us to push the frontiers of optical networks and deliver a High-Performance Internet with the speed, reliability, performance, and economics needed by our customers and millions of businesses and consumers using the Internet for commerce, collaboration, and communication," Greg Mumford, president, Nortel Networks Optical Networks, said in a release.

Under terms of the deal, part of the purchase price is contingent upon Photonic Technologies meeting certain performance targets, which the companies didn't disclose.

Nortel said the merger would be neutral to operating earnings in 2000, excluding acquisition charges, and that Photonic would continue providing components to other telecom gear makers.

Nortel first forged an alliance with Photonic in 1998 by taking a one-third stake in the firm.

Launched in 1993, Sydney, Australia-based Photonic Technologies had revenues of $2.5 million in 1999. The firm, which employs 70 people, will become part of Nortel Networks High Performance Optical Component Solutions unit.

News of the merger comes on the heels of yesterday's announcement naming Nortel as the main supplier of BT Cellnet's nationwide UMTS (Universal Mobile Telecommunications System) network in the UK, which will allow users to access the Internet and corporate networks from cell phones.

Shares in Nortel Networks (NT) declined on the merger news, falling $3.25, or 6.3 percent, to $48.38.