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Nortel: Xros Isn't in Trouble

Light Reading
News Analysis
Light Reading
9/18/2000
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Nortel Networks Corp. (NYSE/Toronto: NT) and Analog Devices Inc. (NYSE: ADI) today announced an agreement to jointly develop optical switching elements based on MEMS (micro-electro-mechanical systems) technology (see ADI, Nortel Coproduction Planned).

At first glance, the deal raises a big question mark over Nortel’s acquisition of Xros Inc. earlier this year. After all, Xros is supposed to already have a MEMS-based switch. That’s why Nortel was prepared to pay $3.25 billion for Xros, which only had 90 staff at the time (see Nortel Buys a Monster Crossconnect).

The truth of the matter is a lot less exciting (drat!). ADI’s deal is with Xros, and, in effect, it’s just re-establishing a relationship that already existed. Xros doesn’t make its own MEMS structures. Like other switch subsystem vendors, it gets them made by a foundry operator. In its case, it went to BCO Technologies PLC, a Belfast company that was acquired by ADI a few months ago (see Analog Devices Moves into MEMS).

Today's deal goes further than reinstating BCO as Xros's foundry, according to Greg Reznick, Xros’s president and CEO. “If [ADI] was just a MEMS house, that would be pretty boring,” he says. As it is, ADI has extensive experience making control systems for MEMS devices such as pressure sensors in automobile air bags. This can be put to use in MEMS-based telecom switches, Reznick adds.

-- Peter Heywood, international editor, Light Reading http://www.lightreading.com

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