LISLE, Ill. Tellabs Operations Inc. is back on the acquisition trail for the first time since its attempted acquisition of Ciena Corp. fell through in the summer of 1998. The company announced Wednesday (June 30) that it will acquire NetCore Systems Inc. (Wilmington, Mass.), a route/switch startup, for approximately $575 million in stock.
While NetCore is occasionally characterized as a "gigarouter" provider, vice president of marketing John Shaw stressed that NetCore has never tried to address the core router backbone market served by companies like Nexabit Networks Inc., which was acquired late last week by Lucent Technologies Inc. Instead, NetCore has developed a hybrid Internet Protocol/Asynchronous Transfer Mode switch called Everest, which is intended for service provisioning and Quality of Service allocation for packet services up to OC-48 (2.5-Gbit/second) Sonet speeds.
NetCore's plans could be augmented by a Tellabs acquisition. Michael Birck, president and chief executive of Tellabs, told analysts in a conference call Wednesday that Tellabs saw immediate value in adding IP technology from NetCore into Tellabs' cross-connect portfolio, particularly the Titan family of 6100 optical transport systems and 6500 multiservice transport switches. In addition, Tellabs can apply its work in optical dense wavelength division multiplexing to add a DWDM interface to the NetCore Everest switch, giving the switch greater I/O architecture capacity.
Tellabs' expertise in telephony backbones helped it appreciate the fact that Everest "is the only true carrier-class system out there among new service provisioning architectures," said Ahsraf Dahod, president and chief executive of NetCore. "We have no single point of failure in this system."
NetCore already has shown it is closer to volume manufacturing than several startups. Early Everest systems moved from beta test to network field tests in the spring with a major carrier, though Dahod said the company is still under nondisclosure and could not identify the carrier. NetCore named Solectron Corp. as a manufacturing partner in March, and announced last week that Mitsubishi Corp. would serve as an Asia/Pacific distributor of the Everest switch.
The NetCore technology will allow Tellabs to give carriers an ability to offer more services to customers. For example, NetCore announced at the recent Supercomm show a "Vista" suite of software technologies that allows carriers to provision virtual private networks for corporate customers, utilizing the virtual circuit technologies of the Everest switch.
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