As predicted by PC Week (25 May), Nortel has snatched Bay Networks in a deal worth $9.1 billion (#5.9 billion).
The move ends weeks of speculation over the future of Bay in a market were the explosion in data communications is driving telecom equipment giants to snap up data networking companies.
David House, CEO of Bay, said: "Telecom vendors need to be able to handle Web traffic and likewise data vendors need to follow their traffic into carrier networks."
No job cuts are expected as a result of the merger. "Nortel's new enterprise division will include the current 4,000 Nortel staff, plus all 7,000 people at Bay increasing this group to 12,000 staff," claimed Nortel's managing director of European data networks, Malcolm Collins.
He said Bay would retain its identity and branding and be given the flexibility and freedom to develop.
Analysts agree that the two companies' products complement each other well. "Nortel's core competency is in backbone switching technology for ATM, frame relay and wireless networking but this is where it stops," said Mark Raymond, a senior analyst at Gartner. "Nortel wasn't a player at the edge of the network and this is where Bay's strengths are. Bay's Accelar range of routing switches and the Optivity network management tools are strong in enterprise/campus networks, which is precisely what Nortel's portfolio lacked."
Paul Trowbridge, analyst at Bay, said: "There will be some crossover as Nortel already has 4,000 people working on its enterprise data business which includes the Passport range of ATM switches, and Bay's Centillion products are also business-class ATM products."
Trowbridge was unable to say which, if any, of the products would be discontinued.
The merged firms will clash with market leader Cisco, warned Nortel's Collins.
A Cisco spokesman referred to Nortel as an "old world company, desperate to compete in the Internet-driven economy".
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