Nortel?s proposed $9.1 billion acquisition of Bay Networks could still fall through or end in tears, claim networking rivals.
But analysts believe their criticisms are just masking talks aimed at making similar deals with other telecomms equipment vendors.
Because the Bay deal is far from finalised, new bidders could reveal themselves and launch a gazumping war, believes Pam Bilderbeek, a director at market research firm IDC. Lucent, which was originally reported to be interested in Bay, may not have given up.
Some Bay rivals claim merger is not the best route into the converged market - even while they may be looking for partners of their own.
Richard Freemantle, vice president of northern Europe at Cisco, said: ?Our view is that big acquisitions mostly fail. We are very conservative about how we develop or acquire technology. Yes we need to move forward but we traditionally do this ourselves, with partners, or acquire small technology companies where the shared vision can be brought into the fold. Big acquisitions are so risky that it?s hard to point any that have worked.
According to Nortel, the deal will create ?a new category of company? that will offer integrated voice, data and video over a corporate IP backbone - a market that traditional telecomms equipment vendors and data specialists are both attacking from opposite directions through smaller acquisitions.
Bilderbeek gave the proposed acquisition the thumbs up. ?This is good for both companies. It will bring together the best of both worlds and spur on a round of acquisitions.?
IDC believes it is only a matter of time before Lucent, Ericsson and the other telco equipment manufacturers announce their own major data acquisitions. A possible target could be 3Com, with a likely predator being close partner Siemens.
3Com?s European product marketing manager, Nigel Hawthorn, did not rule out a merger with a telco equipment vendor, but said ?I don?t think we need it.?
He claimed 3Com would prefer to continue with its alliances, notably with Siemens and Newbridge, to win the hot voice-data integration battle. ?It is more likely to be the other way around. They [traditional voice vendors] need us,? he claimed.
?What this deal does do is give a real wake-up signal to the smaller data networking companies such as Cabletron and Shiva [which both have strategic relationships with Nortel]. Where do they go now?? he asked.
Cisco is predictably bullish that it would not be acquired by a telco supplier, even though it announced a shareholder rights plan, a classic defence against takeover, last week. Instead, it aims to ride the voice-data train independently, using its ambitious five phase plan.
Freemantle said: ?Cisco has a market capitalisation of $80 billion. It would be unlikely that one of the voice companies could contemplate buying us."
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