Nortel Networks Acquires Photonic Technologies for US$35.5 million

Nortel Networks has acquired of Photonic Technologies, a developer of optical components based in Sydney, Australia, for up to US$35.5 million in cash. Nortel Networks already owned approximately one third of the privately held company.

Photonic Technologies develops optical component technology for the manipulation and control of the polarization of light. Photonic Technologies’ circulators and dynamic gain flattening filters are critical technologies for high-speed optical networks and Dense Wavelength Division Multiplexing (D-WDM) networks.

Photonic Technologies will become part of Nortel Networks High Performance Optical Component Solutions (HPOCS), the unit recently formed to bring together all Nortel Networks businesses serving optical systems producers with strategic optoelectronic and microelectronic components. HPOCS offers one of the broadest ranges of strategic optical components in the industry and works closely with Nortel Networks Optical Networks to develop the world’s leading systems for the Optical Internet.

Founded in 1993 in Sydney, Australia by Ralph Betts and Steven Frisken, Photonic Technologies employs 70 people. Photonic Technologies develops and manufactures at its Sydney facilities and had revenue last year of US$2.5 million. Photonic Technologies will continue to be led by managing director Betts and technical director Frisken.

Nortel Networks first formed an alliance with Photonic Technologies in 1998, took an approximate one third stake in the company, and worked closely with its team to develop their leading-edge technology. A portion of the US$35.5 million consideration is contingent upon Photonic Technologies meeting certain business objectives. The acquisition is expected to be neutral with respect to Nortel Networks earnings per share from operations this year (excluding acquisition-related charges). The optical components market is expected to grow to US$23 billion in 2003, from US$6.6 billion last year, a growth rate of 37% a year, according to analyst firm RHK.

Nortel Networks was ranked number one globally in Optical Internet solutions for 1999, according to recent reports from the Dell’Oro Group, RHK, and Warburg Dillon Read. The global Optical Internet market is expected to grow from US$19.4 billion in 1999 to US$52.3 billion in 2003, a compound annual growth rate of 28%, according to RHK.

More than 75 percent of North American Internet backbone traffic travels across Nortel Networks systems. In 1999, Nortel Networks set the standard for speed with its 80 Gbps line rate OPTera technology, and for bandwidth with the OPTera 1600G, which will transmit 160 colors of light across a 10 Gbps system, for total capacity of 1.6 terabits per second (Tbps).