Light Reading

Nortel to Offload Data Gear to Radware

Ray Le Maistre
2/20/2009
50%
50%

Nortel Networks Ltd. may have struggled to find a buyer for its Metro Ethernet Networks (MEN) division, but the Canadian vendor, currently restructuring under bankruptcy protection rules, has found a taker for the bulk of its application switching and WAN optimization products. (See Nortel to Hold MEN and Nortel Files for Bankruptcy Protection.)

The proposed buyer is Radware Ltd. (Nasdaq: RDWR), a specialist in applications delivery and security systems that's looking to boost its data center virtualization portfolio. (See Radware Buying Nortel's L4-7.)

Financial terms have not been disclosed, but when word of Radware's interest in some of Nortel's portfolio was first reported in January, a sum of around $50 million was mentioned, but a deal of that magnitude isn't going to help Nortel's current situation unless it opens the asset sale floodgates. (See Nortel M&A Rumor Update, Should Nortel Be Sold for Parts?, and The Decline & Fall of Nortel Networks.)

Nortel bought its way into the application switching sector in 2000 when it paid more than $7 billion in stock for Alteon, a valuation described by one industry executive as "insane." (See Nortel Buys Alteon for Big Bucks .)

The specific products Radware's hoping to acquire -- the 510 and 610 Application Accelerators; the 3408E, 2424E, 2424 SSL E, 2216E, and 2208E Application Switches; and the Virtual Services Switch (VSS) 5000, all currently part of Nortel's Enterprise division -- fit neatly with its strategy. Find out more about Radware's plans in the data center and applications delivery markets in the following video.





Stalking horse
Because of Nortel's current credit protection status, the planned transaction process will follow the auction guidelines set out in Section 363 of the U.S. Bankruptcy Code.

Radware, as the initial buyer, is referred to as the "Stalking Horse" in this process, under which other bidders can submit a higher offer. You can read more about this, and how it relates to the Nortel/Radware deal at this Nortel Buzzboard.

Radware's chief operating officer, Ilan Kinreich, tells Light Reading that neither the proposed acquisition price, nor the number of Nortel employees that would transfer to Radware as part of the deal, may be disclosed, because of the bankruptcy court auction process.

He did say, though, that the plan was to take on "a good number of staff who would augment our R&D [and] who have been intimately involved in the Alteon product line, along with support engineers and some sales people."

Kinreich says the deal is "primarily about acquiring the customer base and sales channels. Nortel has done a good job selling [its application delivery products] as part of a larger enterprise and carrier solution set." He adds that the deal would particularly strengthen Radware's position with telecom operators and complement the company's existing business in the Asia/Pacific and EMEA (Europe, Middle East, and Africa) regions in particular.

Although he couldn't go into any details about how many customer relationships Radware might gain should the deal close as planned during the second quarter of this year, Kinreich notes that "tens of thousands of Alteon units have been sold over the years, and many of them are still in use in enterprises and data centers. We can offer [Nortel's customers] a strong roadmap for their existing platforms" and future upgrades to high-bandwidth and high-capacity systems. The COO adds that, in the future, Radware would look to integrate its own product lines with the Nortel assets to create a "best-of-breed product offering."

If his company doesn't lose out to a rival bidder, Kinreich says, the combined market share of the Nortel and Radware application delivery businesses would put it on a par with that of the market's No. 3 player, Citrix Systems Inc. (Nasdaq: CTXS), and better position Radware to compete with the market leaders, F5 Networks Inc. (Nasdaq: FFIV) and Cisco Systems Inc. (Nasdaq: CSCO). See where Radware currently sits in the application delivery controller (ADC) market, according to Gartner Inc. , by checking out this market overview.

— Ray Le Maistre, International News Editor, Light Reading

(8)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 4:11:08 PM
re: Nortel to Offload Data Gear to Radware
Reported in the Ottawa Citizen (and brought to my attention via the All About Nortel blog) -- the price for Alteon was $17.65M.

Ottawa Citizen: http://tinyurl.com/bqslcq
All About Nortel: http://tinyurl.com/auukt5

Globes, you'll recall, was thinking more in the $30M-$50M range. That was pre-bankruptcy.

http://www.lightreading.com/bl...
heretoday
50%
50%
heretoday,
User Rank: Light Beer
12/5/2012 | 4:10:59 PM
re: Nortel to Offload Data Gear to Radware
.23% is not really a fair valuation of the original investment, nor is $17m a good or bad price for the technology.

NT wanted in on the Entprise market badly back in 1999/2000. Bay and Alteon made up the bulk of that investment which was approximately a $11.5B stock swap. If memory serves NT only paid a marginal premium over the respective market caps. At the time though NT was sailing with a market cap of about $100M. If you take market caps as a representation of value.. and many people unfortunately do... the enterprise invest was expected to be about 10%-11% of NT's acctual $21B business...something around $2.1B. Bay was doing about $2B prior to the acquisition and Alteon was doing a few hundred million so it was not a stretch to expect that the new enterprise portfolio should have netted 10%-11% of NT's total reveune moving into 2001 - 2002. And I believe it did.

If NT had paid a lot of cash for those companies you would have exected to recover that cash through the margin of the products, but NT didn't..it was funny money.

Look at it this way, my single family house has fluctuated in market price up and down 50%, but it's relative value has remained the same...for the price I can still buy a smiliar house in the same market.... the tide rises and sinks all ships.

The price of stock is the same in nature.

Over the last 9 years NT has had a pretty decent run on enterprise technology that was the result of the acquistions of Bay and Alteon. In the end I think it was a good move....but some of the technology is now pretty long in the tooth.

The $17M for the left over technology is irrelevant. The products mentioned,excluding the VSS5000, have been around for 9-12 years. NT did not develop the technology and spent very little in the follow on feature development and sustaining engineering... this is old stuff. I didn't say bad stuff, just old. Much of it is ASIC based and has had just about all of the blood squeezed out that can be. I'd be surprised if NT even spent $18M on development in the last 5 years... so who cares. They served their purpose.

And I hate Nortel as much as the next guy that got screwed out of their severance, retirment and benefits, but I think you still need to put the proper perspective on the business.

Now Clarify.... that's a whole different can of worms..... Qtera...oops.
Brightspark
50%
50%
Brightspark,
User Rank: Light Beer
12/5/2012 | 4:10:59 PM
re: Nortel to Offload Data Gear to Radware
The conditions - "Stalking Horse" play directly into a previous comment of mine in that Huawei may bid for the MEM [and maybe more] business, only to be out bid at the 11th hour by Cisco in a protectionisim chess move to keep Huawei out of its North American domain.
hyperunner
50%
50%
hyperunner,
User Rank: Light Beer
12/5/2012 | 4:10:59 PM
re: Nortel to Offload Data Gear to Radware
0.23% of the original investment.

And the people who made this "visionary" decision are still millionaires? While thousands of their former employees are struggling for some way to feed their families, pay their medical bills, educate their kids and keep a roof over their heads.

Holy crap, it makes you wonder if Karl Marx had a point :-)

hR.
fiber_r_us
50%
50%
fiber_r_us,
User Rank: Light Beer
12/5/2012 | 4:10:54 PM
re: Nortel to Offload Data Gear to Radware
The acquiring companies always underestimate the ability of the evil "status quo" forces within the acquiring company to squeeze the life out of anything that threatens existing product lines, business units, or organizational structure. The acquiring company's "culture" suffocates the hapless acquired company.

hyperunner
50%
50%
hyperunner,
User Rank: Light Beer
12/5/2012 | 4:10:54 PM
re: Nortel to Offload Data Gear to Radware
@heretoday

Thanks for that explanation. I guess there will be folks who disagree with your analysis, but I for one found it pretty logical, and it made me think a different way about acquisition prices.

What I don't understand is this. It sounds like Nortel bought Bay and Alteon, and then basically abandoned all development on the products - despite the fact that they seemed to be bringing in a decent revenue stream. Yet some of these products must have been quite advanced in their time, given you say that they are still deployable today after virtually no development.

(I guess it's also a testiment to the engineers who have to squeeze the performance out of those ASICs without the funding to do a proper next gen box).

Why do acquiring companies do that? Nortel isn't alone in that respect - look at the billions that Lucent spent on acquired companies whose products were EoL after a couple of years? If the technology (and customer base) is worth paying billions of dollars for, then surely it's worth spending a few million dollars more to retain the technology position that generates that revenue.

What am I missing here?

hR.

hyperunner
50%
50%
hyperunner,
User Rank: Light Beer
12/5/2012 | 4:10:50 PM
re: Nortel to Offload Data Gear to Radware
The acquiring companies always underestimate the ability of the evil "status quo" forces within the acquiring company to squeeze the life out of anything that threatens existing product lines, business units, or organizational structure. The acquiring company's "culture" suffocates the hapless acquired company.

Yes, I can understand that. But some companies seem to be able to make acquisitions work. Cisco is a classic example. At least they appear to be able to make them work - I get that impression as an outsider.

I know your comment was partly meant as a joke, but with a serious message. But can it really be that simple?

For example. Lucent paid, what...$20 billion for Ascend. But they never developed a next gen ATM switch.

Let's assume this was because of status quo elements in Lucent - "not invented at Bell Labs".

Can it really be the case that a company would spend so much money on an acquisition, yet then not have the management strength to make sure that the acquired company could flourish without "status quo" interference?

Wait a minute, who am I kidding? This is Lucent after all. There is no level of incompetence to which they cannot rise :-)

hR.


High-Tide
50%
50%
High-Tide,
User Rank: Light Beer
12/5/2012 | 4:10:49 PM
re: Nortel to Offload Data Gear to Radware
I think the analysis is okay if not taken too literally. Nortel has indeed invested development funds on L2/L3 Ethernet switching, and L4-7 application switching products over the last 8 to 10 years. All the original Alteon products and Bay Products are EOL. On the switch side, several generations of successors have been produced, with decent success. On the Alteon side, less so. So to say we never did anything with them is not accurate. For examples, check out the new stackables and core switches - they are formidable products - all derivatives of the Bay aquisition. Nortel still has the best stacking in the industry - by far. The Alteon SSL technology will live on, post Radware, in the form of remote access products(SSL VPN) and the Accelerated Firewall, and these work very well.

All that said, more focus should have been placed on the Alteon gear. We would love to see a greater % of R&D spend in Enterprise data - but to say there was no development is simply and grossly inaccurate, at least on the switch side. The L4-L7 business was somewhat starved during a critical time 3 or 4 years back, allowing F5 to gain market share. The complexity of the product also limited sales opportunities - some sales reps and partners could not easily understand this technology - missing opportunity.

There are plenty of other aqusisitons that did not bear fruit that are more disturbing examples - specifically Clarify and Sonoma. These seem to have been the worst - Sonoma products were basically killed off a few months after the aquisition. Nobody knew what to do with Clarify - had nothing to do with communications.

For all the negative things being said about Nortel, some well deserved, the technology speaks for itself. It seems that the LTE products are stellar, as are the optical - both market leading from a performance perspective. In Enterprise, the switching, voice, and UC products are also rock solid, modern, and high-performing. I saw a post someplace that said if Nortel had the bankroll, it would be a different playing field. Interesting thought. If some decisions makers had taken a different path, we might be singing a much happier tune.

HT
Educational Resources
sponsor supplied content
Educational Resources Archive
Flash Poll
From The Founder
Anshul Sadana answers questions from Steve Saunders, Light Reading's founder and CEO, about Arista's CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Between the CEOs
Video Exclusive With Basil Alwan, Alcatel-Lucent

7|24|15   |   26:44   |   (5) comments


Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
LRTV Custom TV
VDF: Enable the Financial With Mobile Money

7|20|15   |   06:53   |   (0) comments


Ian Ravenscroft discusses how operators can expand to occupy the entire digital services value chain through service innovation.
LRTV Custom TV
Telefónica on OSS Transformation

7|20|15   |   06:01   |   (0) comments


Jose Gonzales discusses the details of Telefónica's operation transformation program.
LRTV Custom TV
Judi Achmadi on Huawei's Cloud Storage Solution

7|20|15   |   03:33   |   (0) comments


Judi discusses the key business goals of TelekomSigma's public cloud service and how Huawei's solution helps them address challenges.
LRTV Custom TV
KPN Enlightening Digital Business & IT Transformation

7|20|15   |   06:19   |   (0) comments


Rob de Beer discusses the changes that operators need to make with service innovation now coming from the Internet world.
LRTV Custom TV
Stratus Telco-Grade Cloud Solutions & NFV

7|20|15   |   07:34   |   (0) comments


Ali Kafel from Stratus Technologies addresses high-availability concerns within the telco industry with a solution that enables telcos to provide high-availability and stateful fault-tolerance using a software-based approach.
LRTV Documentaries
The Six Million Dollar Business Man

7|20|15   |   01:52   |   (0) comments


Steve Saunders, publisher. A man barely alive after an acquisition malfunction imploded the company he founded. Gentlemen, we can rebuild Light Reading. Better, faster, stronger.
Between the CEOs
CEO Chat With Anukool Lakhina, Guavus

7|20|15   |   38:51   |   (1) comment


Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
LRTV Custom TV
IBM's Flash Storage With Intel QuickAssist

7|20|15   |   03:18   |   (0) comments


Intel's Bev Crair and IBM's Eric Herzog discuss how IBM's V9000 Flash Storage System has helped customers around the world. Featuring real-time compression powered by Intel QuickAssist Technology, the V9000 is a next-gen flash storage solution.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
To keep up with consumers' increasing digital lifestyles, an IT system and operating model overhaul is required using a modern BSS, IES and analytics.
Hot Topics
Eurobites: Nokia Seals HERE Sale
Paul Rainford, Assistant Editor, Europe, 8/3/2015
Cable Feuds With Senate Dems Over STBs
Alan Breznick, Cable/Video Practice Leader, 7/31/2015
Predictions Are Hard, Especially About the Future
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/31/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
I was pleasantly surprised when Ericsson recently agreed to let me interview its CEO, Hans Vestberg. Traditionally, mega-companies like Ericsson (or Cisco) have kept ...
Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
Cats with Phones
Comes With Free Phone Stand Click Here
Who says cats don't have any skills?