Alcatel About to Go Native

Alcatel (NYSE: ALA; Paris: CGEP:PA) is about to acquire Ethernet access specialist Native Networks Ltd. in a deal thought to be worth tens of millions of dollars, according to industry sources.

Both companies, which have been close partners since early 2003, declined to comment on the matter (see Alcatel Takes a Fling at a Ring and Alcatel Partners With Native).

One industry source, who requested anonymity, said the deal was close to completion and may be announced within the next two months, but Light Reading believes the deal may close within the next few days.

The source said the deal was set to be worth tens of millions of dollars, but the value of the deal, and whether any Alcatel stock might be involved, is unclear.

Native was founded in 1999 and has raised $45 million from more than 10 venture capital firms in three rounds of funding, the most recent in November 2003 (see Native Raises an Extra $4.3M). Investors include Apax Partners, Alta Berkeley Venture Partners, Jerusalem Venture Partners, and Skypoint Capital Corp.

The company had an energetic 2001, when it launched its first products and announced a carrier customer, but then needed the Alcatel OEM deal to help it out of a post-bubble hole (see Native Networks Launches at Lightspeed, Storm Goes Native, and Native Secures Its Survival).

Alcatel's acquisition of Native has been widely expected for some time, says Scott Clavenna, chief analyst at Heavy Reading.

"This did seem inevitable over the years. Native filled a need in Alcatel's SDH line for high-value Ethernet services support and delivered that successfully," says Clavenna. "Native has been branching out more on its own of late, offering standalone products that added Ethernet and packet transport to legacy SDH systems, so Alcatel's move could be seen as a way to capitalize on that product expansion or to rein it in and keep Native as a technology and card supplier." (See Native Networks Showcases EMX3700 .)

He adds that because the two companies have long been partners, the deal will have little impact on the competitive landscape, where Native's technology -- which Clavenna describes as "RPR-like" -- comes up against solutions from Cisco Systems Inc. (Nasdaq: CSCO), Corrigent Systems Inc., and Nortel Networks Ltd. (NYSE/Toronto: NT). (See Incumbents Grab RPR Mantle.)

— Ray Le Maistre, International News Editor, Light Reading

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