Nortel Networks - Acquisition Agreement

RNS Number:3606D
Nortel Networks Corp
6 January 2000


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Nortel Networks to Acquire Promatory for up to US$778 Million, Extending
High-Speed Internet Access Capabilities


DSL Technology to Deliver Next Generation On-Ramps To The Optical Internet


Brampton, Ont.- Nortel Networks* (NYSE/TSE: NT) announced today a definitive
agreement to acquire Promatory Communications Inc., a leading developer of
Digital Subscriber Line (DSL) platforms for high-speed Internet access, for up
to an estimated US$778 million in Nortel Networks common shares, a portion of
which is contingent upon Promatory achieving certain business objectives. This
acquisition will give Nortel Networks first-mover advantage in taking DSL
technology to next-generation intelligence and performance, making high-speed
Internet access deployable wherever a home or business has a telephone
connection.

Promatory's DSL, solutions enable ordinary copper telephone wires to carry
Internet traffic with quality of service at speeds of up to eight megabits per
second, 150 times faster than today's conventional analog modems. Promatory's
new custom-designed services for business and residential users dramatically
multiply the revenue generation potential of DSL for service providers while
reducing costs.

The addition of Promatory's next generation global DSL platform to Nortel
Networks Universal Edge (UE) portfolio offers the industry's broadest range of
end-to-end firstmile access solutions.  Nortel Networks 1-Meg Modem, the leader
in easy-to-install DSL solutions, has already won thousands of users for
high-speed DSL access. Nortel Networks continues to he a leader in
voice-over-cable solutions, cable modems, carrier-class remote access servers,
and broadband wireless solutions. Nortel Networks is delivering new, mass-market
services that are enabling the high-performance Internet.

"The industry has been waiting for a true broadband Internet access solution
over copper, one that delivers high-speed service for the user and a profitable
business model for the service Provider," said Clarence Chandran, executive vice
president and president, Nortel Networks Service Provider and Carrier Group.

"The addition of Promatory's next generation DSL platform to Nortel Networks
leading first-mile access solutions, combined with the Optical Internet,
Internet telephony, and Nortel Networks services and applications will allow us
to make high-speed Internet access a reality for homes and businesses
everywhere."

Promatory's multiservice broadband access platform, which is shipping today,
delivers the first truly business-class DSL services, accommodating all
varieties of DSL with direct integration into the Optical Internet backbone.

In addition, Promatory's next generation platform enhances Nortel Networks'
ability to offer toll-quality voice-over-DSL (VoDSL) service, allowing service
providers to offer multiple voice and Internet services simultaneously over the
same twisted pair of copper wires.
The VoDSL market is set to grow dramatically as alternate and established
service providers move to packet-based networks.

Analysts forecast that the entire DSL market is set to take off, with
projections of seven million DSL lines in service by 2002 compared with fewer
than one million today. By 2003, the market is expected to rise to US$4 billion,
almost 40 times last year's estimated total of US$103 million.

Based in Fremont, California, Promatory is a venture-backed start-up. It was
founded in 1996 and employs about 100 people,including 85 in Fremont and sales
offices throughout the U.S. and in the UK and Singapore. Promatory president
Roger Dorf will become vice-president of a new Nortel Networks business unit,
reporting to Don Richmond, vice president and general manager of Nortel Networks
Access Solutions.

"Joining forces with Nortel Networks is the right move for us," Dorf said.
"Nortel Networks has the global reach, reputation, and relationships with the
world's service providers that will enable Promatory's next generation platforms
to accelerate to market leadership."

The transaction, which is expected to close in the first quarter of 2000 is
subject to customary regulatory approvals. Of the purchase price, an estimated
US$705 million will be paid in Nortel Networks common shares at closing on a
fully diluted basis. Up to an addition US$73 million in common shares is payable
subject to the fulfillment of certain business performance objectives in 2000.
The acquisition is expected to be slightly accretive to Nortel Networks earnings
per share in calendar year 2000 (before acquisition-related charges).

The number of common shares of Nortel Networks to be issued on a fully diluted
basis at closing will be determined based on the average price of Nortel
Networks common shares during a specified period prior to closing and will not
be greater than 9.4 million or less than 6.3 million. For example, based on a
US$93.53 per common share price of Nortel Networks, the transaction would result
in Nortel Networks issuing approximately 7.54 million common shares of Promatory
on a fully diluted basis on closing.

Nortel Networks in a global leader in telephony, data, wireless and wireline
solutions for the Internet. The Company had 1998 revenues of US$17.6 billion and
serves carrier, service provider and enterprise customers globally. Today,
Nortel Networks is creating a high-performance Internet that is more reliable
and faster than ever before. It is redefining the economics and quality of
networking and the Internet through Unified Networks* that promise a net era of
collaboration, communications and commerce.

Visit us at www.nortelnetworks.com

Certain information included in this press release is forward-looking and is
subject to important risks and uncertainties. The results or events predicted in
these statements may differ materially from actual results or events.  Factors
which could cause results or events to differ from current expectations include,
among other things; the impact of price and product competition; the dependence
on new product development; the impact of rapid technology and market change;
the ability of Nortel Networks to integrate the operations and technologies of
acquired businesses in an effective manner; general industry and market
conditions and growth rates; international growth and global economic
conditions, particularly in emerging  markets and including interest rate and
currency exchange rate fluctuations; unanticipated impact of Year 2000 issued;
and the impact consolidations in the telecommunications industry. For additional
information with respect to certain of these and other factors, see the reports
filed by Nortel Networks with the United States Securities and Exchange
Commission.  Nortel Networks disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.


* Nortel Networks, the Nortel Networks logo, the Globemark, Unified Networks,
and How the world shares ideas are trademarks of Nortel Networks.

Take part in our webcast at www.nortelnetworks.com/pressconf010600

Or visit Nortel Networks' website at www.nortelnetworks.com and Promatory's at
www.Promatory.com.

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