Nortel buys Bay for $9 billion

Acquisition is good news for customers of network firm

Nortel?s decision to acquire Bay Networks for $9.1 billion spells good news for Bay customers, but could force rivals into similar acquisitions as voice and data networks converge, writes Steve Ranger. The combination of the two companies will result in networks that carry voice data and video across local area networks, wide area networks and carrier backbones, Nortel officials said. As part of the deal, Bay will become a wholly owned subsidiary of Nortel. Bay chairman David House will become president of Nortel, while Nortel?s current president and chief executive John Roth will become chief of the combined group. Bay users have welcomed the acquisition. Cardiff County Council recently moved to a Bay BH5000 in its asynchronous transfer mode backbone as part of its new IP infrastructure, and is about to install another three Bay Centillion switches. Support services manager Crispin O?Connell said: ?Anything that pumps money into Bay is welcome news for us.? ?Research and development is the key for high tech companies and if they are making this investment then it can only benefit us as customers.? Philip Codling, senior business analyst at Datamonitor said that the deal reflected convergence in voice and data networking and would offer Nortel the expertise to provide customers with a more comprehensive product range. Codling said Bay had previously been seen as a company with good technology and poor marketing, but it was Bay?s success in improving its technology focus and marketing in the last 18 months that made it an attractive proposition. BAY HISTORY While 3Com and Cisco grew rapidly by acquisition, following its formation by the merger of Wellfleet and SynOptics, Bay opted for organic growth an fell behind its rivals. Acquisition Nortel and Bay Networks Nortel: 1997 revenue of US$15.5 billion. A broad portfolio of high end networking products for telecommunication companies and large businesses. In March 1991 bought UK telecoms and IT company Standard Telephones and Cables for more than $1billion. Bay Networks: 1997 revenue of $2.1 billion. Formed from the merger of Wellfleet and SynOptics in October 1994. Products include local area network and enterprise switches, routers, and network management software. Bought Gigabit Ethernet company Rapid City in June 1997 for $155 million, and more recently Netsation and Netwave