Nortel Networks will acquire Sonoma Systems in a stock deal worth $540m.
Sonoma's technology helps deliver high-speed integrated video, data and voice communications simultaneously over a single connection.
Sonoma's products allow its network service provider customers to offer services including high-speed Local Internet access, video services and Internet telephony. Nortel already had a marketing relationship with Sonoma. The companies plan to incorporate Sonoma's network management capabilities with Nortel's.
The Sonoma Systems products have been incorporated into Nortel Networks Universal Edge 600 series, which are being branded, marketed, sold and supported by Nortel. The combination has already landed one customer, Madison River.
Sonoma will get $480m worth of Nortel shares outright, and up to $60m more if meets certain business objectives in the first year.
Nortel will issue approximately 6.9 million common shares for Sonoma's shares. The deal is expected to be neutral in calendar year 2000 and slightly accretive to earnings from operations in calendar year 2001.
Last month, Nortel announced plans to acquire Alteon Web Systems for $7.2bn in stock, in a bid to shore up its ability to manage Web traffic. And the Canadian firm exceeded Wall Street expectations for the second quarter, increasing growth expectations for the full year. Nortel reported a profit of $561m, or 18 cents per share, excluding special charges and one-time events, topping First Call consensus of 15 cents per share.
Sonoma had filed to go public in March, but never made it out. According to documents filed with the Securities and Exchange Commission, Nortel already owned warrants to purchase six million shares of the company.
Sonoma lost $14m on sales of $7.07 million in 1999, according to its regulatory filings.
See ZDII for US tech investor news.
See techTrader for more technology investment news, plus quotes and research.