Zhone Acquires Nortel's Access Gear

Zhone Technologies Inc. said today that it is buying several assets in Nortel Networks Corp.'s (NYSE/Toronto: NT) AccessNode and Universal Edge 9000 product lines for an undisclosed sum. The equipment maker, based in Oakland, Calif., says it will also assume support for Nortel's existing AccessNode and AccessNode Express customers.

Nortel said in May that it was discontinuing its digital subscriber line (DSL) and access businesses and focusing on selling products in faster-growing markets with higher profit margins.

The digital loop carrier (DLC) market was worth $2.65 billion last year, and the gear Zhone is buying from Nortel makes up 15 percent of that pie -– about $397.5 million, according to market research firm RHK Inc.

Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Marconi Communications PLC (Nasdaq/London: MONI), and Advanced Fibre Communications Inc. (Nasdaq: AFCI) will be Zhone's biggest rivals in the DLC space. The customers Zhone will have to support include Verizon Communications Inc. (NYSE: VZ), Qwest Communications International Corp. (NYSE: Q), and WorldCom Inc. (Nasdaq: WCOM).

Nortel made $30 billion in revenues last year, so selling off the assets that provided roughly 1.2 percent of that sum won't cause it any anguish. For Zhone, however, Nortel's table scraps fit nicely with its portfolio of local access equipment for service providers.

"The deal makes sense for Zhone because it gives us market share and ingratiates us with some major carriers who already have this gear," says Tim Donovan, a spokesman for Zhone.

In this transaction, Zhone will get Nortel's DLC product, AccessNode, which uses high-speed lines to extend the reach of central office switches to remote neighborhoods. Zhone will also get Nortel's Universal Edge 9000, a product that sits between the carrier's central office and the customer location and can operate either as a digital subscriber line access multiplexer (DSLAM) or as a DLC.

Contrary to some news reports published this week, Zhone says it is not buying Nortel's entire Access Devices unit, nor is it buying the DSLAM products that Nortel acquired from Promatory Communications. Zhone is also not buying Nortel's Universal Edge 9000 DMS, which was an extension for Nortel's Class 5 switches.

Getting into the DSL equipment business could be a grim experience, considering the number of DSL-focused competitive local exchange carriers (CLECs) that have folded this year. However, by not going after DSLAMs, Zhone might have picked a wise battle. "If you want to get into the DSL business, selling remote terminals is a less risky proposition than dealing with central office equipment," says Jon Cordova, an analyst at Infonetics Research Inc.

- Phil Harvey, Senior Editor, Light Reading
zoomee 12/4/2012 | 7:54:26 PM
re: Zhone Acquires Nortel's Access Gear They must have been in the Zhone to do this deal. These Access Nodes are obsolete products sold mainly to ILECs, Verizon used to be the biggest customer. ILECs are replacing these dinoDLCs as fast as they can. Good luck getting a penny of after sales support revenue on a dead product line out of Verizon or any other ILEC.

"Ingratiate" ourselves with our new found customers? They will chew them up and spit them out. Check out what just happened to Pliant and others in this space.
joe_average 12/4/2012 | 7:54:25 PM
re: Zhone Acquires Nortel's Access Gear Very interesting happenings!!

What exactly did Zhone acquire?

Was it the intellectual property rights, the R&D facilities, the people working on these products, or any/all of the above?

Also if Zhone doesn't get the UE-DMS, is NT going to support it or dump it?
lrdr 12/4/2012 | 7:54:22 PM
re: Zhone Acquires Nortel's Access Gear I thought they already had product offerrings in this area... Why are they buying another one? And how much money could they possibly have left after their other acquisitions?
dodo 12/4/2012 | 7:54:19 PM
re: Zhone Acquires Nortel's Access Gear Joe

Most of the good engineers working on AccessNode, ANX and UE9K( DLC) were let go on January 8th,2001 . They were the first ones to be sacked thanks to some sales execs who became president of that Business unit.Didn't under technology and products but yet was promoted by Chandran.
Today they are at Ericsson, Tellabs, ONI etc.

Intellectual property rights- wonder who shut the lights in Montreal and Ottawa. The labs and R&D facilities are long gone except for the premises in Atlanta.

UE9K-DMS was still under development the last time I ventured to check ( still a POTS box though it was supposed to be a voice, data and video and rumoured to be part of Succession at one of those interminable re-orgs). Only the shadow knows !!!!!!!!!!!
adobe2 12/4/2012 | 7:54:15 PM
re: Zhone Acquires Nortel's Access Gear Does this deal include the remote access division.

I know they were trying to find a buyer for that.

T-bone 12/4/2012 | 7:54:06 PM
re: Zhone Acquires Nortel's Access Gear Mory and the rest of the Ascend team doing dial again? I don't think so.
mu-law 12/4/2012 | 7:53:58 PM
re: Zhone Acquires Nortel's Access Gear "Mory and the rest of the Ascend team doing dial again? I don't think so."

Right! Mory should (now) know a crap terminal server when he sees one.
dodo 12/4/2012 | 7:53:50 PM
re: Zhone Acquires Nortel's Access Gear As far as I recalled ( back last year), the CVX portfolio was under the group , led by Bill Conner ( he moved to be the president of EBusiness in January and he is a goner since April when he managed to jump ship to Entrust );

Don't know where it fits now after all the musical chair exercises we have witnessed lately.
Though it is categorized as an Access product aimed at the carrier and service provider market, it was being marketed by another group other than the Access networks(read DLC) folks in Atlanta

It could be that since Nortel wants to be out of the Access market, the Aptis portfolio is in the parking lot together with Promatory and Sonoma, waiting to be rescued by a good samaritan
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