Lucent to buy network switching supplier

Telecoms equipment giant Lucent Technologies has agreed to buy network switching equipment provider Spring Tide Networks for around $1.3bn in stock.

Lucent said it would take a one-time charge for the write-off of in-process research and development in the quarter the deal closes. The acquisition, scheduled to be completed in September, is expected to cut the company's pro forma earnings per share for continuing operations by about one cent in fiscal 2001.

Lucent's share price finished down 3/4 at 49 1/2 after hitting a new 52-week low of 47 3/8. The stock has traded as high as 84 4/16 in the past year.

Spring Tide, a supplier of virtual private network (VPN) equipment and software, recently announced the first deployments of its IP Service Switch 5000. The company is one of the first equipment manufacturers to offer a VPN device that does not require service providers to install equipment at the customer site. Instead, the device works by establishing a secure connection, or tunnel, at the edge of the service provider network.

Janet Davidson, president of Lucent's internetworking systems business, said: "Spring Tide's people, technology and equipment will play a crucial role in our broadband internet infrastructure strategy."

Companies are increasingly turning to broadband service providers to provide IP services rather than managing them on their own internal corporate networks, she added.

Today's $660m IP services equipment market will increase to $1.6bn over the next year, and exceed $5bn by 2003, according to analyst Ryan Hankin Kent.

The acquisition will allow Lucent to better compete against rivals Cisco Systems and Nortel Networks in the VPN market, which analyst Forrester Research predicts will grow from $751m in 1999 to $14.4bn by 2002.

The transaction, valued at $1.3bn, does not include the four per cent stake Lucent already holds in Spring Tide. Lucent has bought 35 companies in the past four years including nine acquisitions this year.