Nortel to Offload Data Gear to Radware
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.
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