Nortel's optical spree continues

Nortel forks out $1.43bn for optical specialist CoreTek
Written by John Rendleman, Contributor

Nortel Networks for the second time in two weeks has tendered billions of dollars for a startup optical networking equipment developer, today offering $1.43bn (£890m) for CoreTek.

CoreTek, a privately held company with 120 employees, is developing "tunable" laser technology and other optical components that will be used to monitor and reroute traffic in optical networks.

The deal, based on the present price of Nortel stock, will require the company to issue 18.9 million shares of common stock. The two companies expect to close the transaction in the second quarter, officials said.

With CoreTek, Nortel plans to augment its own internally developed first-generation tunable laser technology with what it views as a second-generation solution, said Nortel officials. Specifically, Nortel gets CoreTek's vertical cavity surface-emitting laser technology and its micro-electricalmechanical systems operating at 10GB/s for high-speed Internet and IP networks.

CoreTek expects to begin pilot production of its systems by the end of this year, with full production scheduled for 2001. The acquisition is subject to CoreTek achieving those objectives, said officials.

Nortel intends to use the CoreTek products first in its long-haul optical systems -- for instance, in conjunction with its optical transponders and Synchronous Optical Network systems, which are used to funnel data traffic onto long distance fibre-optic networks.

According to the two companies, the tunable CoreTek laser systems will give network operators additional flexibility in defining and setting up optical communications paths by dynamically altering the specific wavelengths of light generated by individual lasers, said officials.

The ability to dynamically reconfigure optical transmissions "is an absolutely key part of the value equation" for optical networking, and one that "will reduce the life cycle costs -- both for our business and for our customers," said Parviz Tayebati, CoreTek's current chief executive, who will lead the development of the CoreTek technology at Nortel.

Last Tuesday, Nortel bolstered its optical switching and transmission portfolio by buying photonic switch developer Xros $3.25bn (£2bn) in stock. With that purchase, Nortel gains Xros' X-1000 product, a fully optical switch that is scheduled to begin carrier trials by this summer.

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