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FOOL PLATE SPECIAL
An Investment Opinion
Nortel Nabs CoreTek

By Richard McCaffery (TMF Gibson)
March 21, 2000

Ontario-based Nortel (Nasdaq: NT) today announced its third, billion-dollar purchase of an optical networking company since December.

Nortel said it would pay up to $1.43 billion in stock to acquire Wilmington, Massachusetts-based CoreTek, a privately held company with 120 employees that makes optical networking components.

Under terms of the deal, Nortel will issue about 8.9 million shares to acquire all the outstanding shares of CoreTek. The deal is expected to dilute earnings slightly this year and add to earnings in 2001. CoreTek makes tunable lasers and other optical components that help speed the flow of traffic through telecom networks. Its equipment, which uses mirrors to change the wavelength of light, can re-route traffic in real time, making the network more flexible.

It's the second acquisition in the optical networking space in a week for Nortel, which picked up Xros (pronounced ky-ros) for up to $3.25 billion in stock last week. Xros is developing products that switch light signals without converting them back to electrical signals, a technology that speeds the transfer of data and reduces network costs. It's another piece of the puzzle for Nortel, which is trying to become the first equipment vendor to provide end-to-end optical solutions for its customers.

Since December, Nortel has shelled out nearly $8 billion worth of its high-priced stock to fill gaps in its optical networking product line. Meanwhile, rivals Lucent (NYSE: LU) and Cisco (Nasdaq: CSCO) are fishing the same streams. It's easy to see why networking companies are hungry for optical expertise -- the global market is expected to grow to $52.3 billion in 2003 from $19.4 billion in 1999, according to market research firm Dell'Oro Group.

Here's a look at the three players and what they've bought in the optical networking space since January 1, 1999.

Nortel Buys

• CoreTek, an optical components manufacturer for $1.43 billion in stock March 21.
  
• Xros, a photonics switching manufacturer for $3.25 billion in stock March 14.
  
• Qtera, a manufacturer of long reach optical networking systems for $3.25 billion in stock December 15.
  

• Ignitus Communications, a manufacturer of optical components at the network edge, March 14. Terms not disclosed.
  
• Ortel (Nasdaq: ORTL), an optoelectric components manufacturer for $2.95 billion in stock February 7. Through the deal, Lucent gained a valuable minority interest in privately held Tellium, a well-regarded manufacturer of optical switching products.
  
• SpecTran, a manufacturer of specialty optical fibers and products for $64 million in cash July 15.

• Pirelli Optical, the optical systems business of the Milan, Italy-based company for $2.15 billion in stock December 20.
  
• Internet Engineering Group, an optical networking software maker for $25 million December 17.
  
• Cerent Corp., a manufacturer of optical networking hardware for $6.9 billion in stock August 26.
  
• Monterey Networks, an optical transport networking equipment company for $500 million in stock August 26.
  
• StratumOne Communications, a manufacturer of semiconductor products for high speed, wide area networks for $435 million in stock June 29.