Optical/IP Networks

Alcatel Settles with Daines

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has quietly settled its case with Bernard Daines, ex-CEO of Packet Engines Inc.

Both parties declined to comment on the details of the settlement, citing confidentiality agreements.

Daines brought several motions against the company after Alcatel bought gigabit switch vendor Packet Engines Inc., a company he founded, for $325 million in 1998.

Now CEO/CTO of broadband Ethernet startup World Wide Packets Inc., Daines says he's glad it's over.

"I'm smiling," he admits. "I'm pleased that it's over." But neither he nor Alcatel will specify what the ultimate resolution has been. "Like almost all cases of this kind, it's confidential," Daines says.

Daines' fight with Alcatel lasted nearly two years. Court reports show it took a small army of lawyers in several firms, mountains of paperwork, and extensive complicated transactions.

Daines' lawyers originally announced they were seeking $350 million in damages, covering complaints in three separate lawsuits filed since 1999. The complaints covered a range of issues, including breach of contract and securities violations. All three have been resolved.

Alcatel says other suits filed by former employees of Packet Engines also have been resolved, with the results sealed for confidentiality.

At the time he first launched his battle against Alcatel, Daines told reporters that the acquiring company had reneged on its promises to Packet Engines employees (see Bernard Daines). He said Alcatel management was particularly heavy-handed in combining Packet Engines with Xylan, another company Alcatel bought for $2 billion in 1999.

"We were turned over to a different crew when the acquisition was done," Daines told Light Reading back in February 2000. "All the promises that had been made to us - of independence, doubling the size of the company, building us a certain building, leaving us alone, not sending hoards of people from France over to the U.S. to tell us what to do - all of those promises vanished within days."

In a final irony, Alcatel last month closed the division that resulted from the Packet Engines acquisition (see Alcatel's Packet Engines Break Down).

Meanwhile, the market downturn and the decidedly mixed results of its acquisition activities seem to have diminished Alcatel's lust for new companies. It's only purchase so far this year has been component maker Kymata (see Kymata Sold for $119 Million), a deal that followed months of speculation. And talks of a merger with Lucent Technologies Inc. (NYSE: LU) went belly up this spring, reportedly when Lucent executives were put off by an alleged lack of equal representation in the management and board of the proposed company (see Alcatel, Lucent Throw in the Towel).

— Mary Jander, Senior Editor, Light Reading

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