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Coretek Is Closed

Light Reading
News Analysis
Light Reading
9/26/2002
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Nortel Networks Corp. (NYSE/Toronto: NT) today confirmed that it will close the Coretek division of its optical components group -- the group it famously acquired for a whopping $1.43 billion at the height of the telecom boom (see Nortel Gambles $1.43 Billion On Tunable Lasers).

Nortel employees learned of the decision last week, on September 19, according to company spokesperson David Chamberlin. Approximately 160 employees are affected, he says. Sources say that most of the layoffs have taken effect immediately, with only a skeleton crew remaining to wind down the facility.

The news shouldn't come as a great surprise, since Nortel already outlined its intention to sell or close down its components activities (see Nortel Falls Short in Long Haul). Chamberlin says the reason that Coretek was singled out for closure was because the market for tunable lasers simply took too long to emerge. "The very advanced tunable lasers and filters produced by Coretek were considered to be very far ahead of market demand," he says.

The timing of the decision is interesting, however. Rumors were circulating that Nortel was close to concluding a deal last week to sell all or part of its components division (see Nortel Close to Components Sale ). One possible interpretation of events is that the deal was done but the buyer didn't want the Coretek group. Nortel, naturally, declined to comment.

Further rumors are emerging that Coretek's management had made a bid to buy out the group, but failed. According to an ex-Coretek employee, the buyout contingent was led by Coretek founder and former CEO Parviz Tayebati, who left Nortel earlier this year, along with some of the current management team, Scott Burroughs and Tom Dudley.

Reportedly, Tayebati backed out of the deal at the last minute. Nortel wasn't impressed by the offer being put forward, says the source, who believes that the company was holding out for a better deal. Burroughs and Dudley may still be trying to strike a deal with Nortel to get the intellectual property rights, he adds.

The Coretek collapse shows how fast the "paper value" of a stock deal can change. The original purchase was an all-stock deal, at a time when Nortel was trading at around $119 a share, according to press releases issued at the time. Today Nortel trades at under a dollar. Taking into consideration the difference in stock price, the value of the shares used in the acquisition now comes out to just over $6.4 million.

— Pauline Rigby, Senior Editor, Light Reading
www.lightreading.com

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droptorgy
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droptorgy,
User Rank: Light Beer
12/4/2012 | 9:41:59 PM
re: Coretek Is Closed
Bobby? Gea?
gea
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gea,
User Rank: Light Beer
12/4/2012 | 9:41:57 PM
re: Coretek Is Closed
Droptorgy: You must be bored! But I can't help myself, so here goes:

Coretek closing is no suprise. The Coretek leaders cheated Nortel management with technology that could never work and that will never needed.
In fact, total laser market is less than 5 hundred dollars worldwide, because lasers are not used for telecommunications and will never be. In fact, lasers are really cheating technology from unscrupulous Indian VCs: laser technology has never proven to work in commerical setting.
crystalgrower
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crystalgrower,
User Rank: Light Beer
12/4/2012 | 9:41:57 PM
re: Coretek Is Closed
CoreTek wasn't a failure! Nortel was!

Funny how they close it after announcements that Iolon and Agility have made sales/design inroads with a far less robust product. Its a "vision thing" or lack thereof!

what you have here is a case of the acquirer dragging down the acquisition!
maryhadalambda
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maryhadalambda,
User Rank: Light Beer
12/4/2012 | 9:41:57 PM
re: Coretek Is Closed
John Roth loved buying glove compartments over the Internet so much, he had to destroy a company to do it at Internet speed. Instead of looking under hood of '56 MG, he should have been looking under hood of Coretek, Xros, Qtera and all those other failures.
crystalgrower
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crystalgrower,
User Rank: Light Beer
12/4/2012 | 9:41:54 PM
re: Coretek Is Closed
I hope your tongue is in your cheek....

otherwise your head is up your a**!
grateful photon
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grateful photon,
User Rank: Light Beer
12/4/2012 | 9:41:52 PM
re: Coretek Is Closed

so true....however john roth and his team clearly weren't the ones to be doing it. it speaks to a larger issue that has plagued this last season of M&A mania. due diligence requires that someone at or near the top of the decision chain just has to have a fundamental understanding of exactly what it is they are buying. i for one, and many of my colleagues were *never* fooled by coretek, xros, qtera and so on. (and by the way, we aren't fooled by infinera now, either.) photonics and the challenges therein weren't unknown among those who worked in the field, just among those who rushed to it with bags full of money.

perhaps they never looked under the hood, and sometimes they probably did in a pefunctory way. in either case, it was about as productive as asking your plumber to take a look at your transmission.

value never goes out of style, even though it was ignored for the bubble years. notice that the best investor ever is a value guy. and warren buffet never ever buys something that he does not thoroughly understand. then he evaluates the value proposition, discounts it against the risk, and pays his price and not a penny more. cowboys like john roth and his merry band of lightweights didn't have the discipline and/or depth to actually do their homework, technical or otherwise.

aside to pauline rigby: recall the discussion on tunable lasers a few months ago. coretek is gone, and agility is still alive.

gratefully yours...

crystalgrower
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crystalgrower,
User Rank: Light Beer
12/4/2012 | 9:41:50 PM
re: Coretek Is Closed
You are so clueless!

The best technology doesn't always win, see Apple Computer! CoreTek wasn't Enron!

Roll yourself another one and go listen to Jerry!
grateful photon
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grateful photon,
User Rank: Light Beer
12/4/2012 | 9:41:49 PM
re: Coretek Is Closed

coretek was an abysmal failure with or without nortel. selling their concept as a technology ready for products in the telecom markets was either a pinnacle of ignorance at best or shameless deception at worse. please!!! tunable 1550 VCSELs with MEMS-based tuning/stabilization. it's a sexy idea and i would enojoy being on the team building it, but you have to be irresponsibly optimistic to suggest that it is less than 3-5 years of very hard and expensive work (with a good bit of favor from mother nature) before you MAY have a reasonable device. THEN you can begin to make it yield and manufacturable. IF you can.

for god sakes, look how long it took to make the buried heterostructure laser a production device from the first report of it: 10 years or more! and that is exceedingly simple by comparison. (and don't even try to argue that technology has advanced in the interim so it should be faster now-- that is another often true but more often misapplied point)

gratefully yours...

grateful photon
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grateful photon,
User Rank: Light Beer
12/4/2012 | 9:41:47 PM
re: Coretek Is Closed

i don't recall suggesting the best technology always wins or even should win. but overhyped stories with little technological substance are really worthless to me. (and hurtful to the science and industry)

here's a clue: 1550nm VCSELs have been worked on by very good III-V groups for no less than a decade before coretek existed without a current-injected device working. the coretek folks were going to do all that and so much more. if you were at all clued-in, it was obvious from the start that it was overpromised.

one thing that i will agree with: coretek wasn't enron. can't argue that.

gratefully yours... (roll away the blues)
chophopper
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chophopper,
User Rank: Light Beer
12/4/2012 | 9:41:41 PM
re: Coretek Is Closed
grateful photon, can you please share your views on infinera. Sounds like you may have some insights on what they are trying to accomplish. Thanks.
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