The world's largest telecommunications equipment maker, Lucent Technologies Inc., will acquire optical networking equipment maker Chromatis Networks Inc. in a stock deal worth $US4.5 billion.
Lucent will buy the privately held Chromatis for 78 million shares of Lucent common stock based on yesterday's closing price of $58.19, Lucent said in a statement. Yesterday, Lucent lost $US1.13, trading at $US56.63 in early morning trading on the New York Stock Exchange.
Lucent already owns 7 percent of Chromatis through its venture capital subsidiary, Lucent Venture Partners Inc., the company said.
Lucent, which is building a next-generation global optical network in partnership with other companies, including Global Crossing Ltd., believes the acquisition of Chromatis will allow it to build more bandwidth into the network for business consumers -- what Lucent called the fastest-growing segment of the optical networking market .
Last week, Chromatis announced it had begun testing its Metropolis telecom platform in partnership with Colorado-based network carrier Qwest Communications International Inc. Metropolis cuts the cost of building metro optical networks in half by efficiently moving various forms of traffic -- specifically integrated data (packet), voice (circuit) and video services -- onto optical wavelengths, while also improving the performance of the network, Lucent said.
Lucent is in stiff competition with Nortel Networks Corp. and Cisco Systems , which have also made optical development a priority.
One US analyst said the acquisition gives Lucent much-needed expertise in the development of products for optical networks.
"This acquisition amplifies the fact that optical networks are becoming the last-mile solution" for networks to end users such as residences and businesses, said Bettina Tratz-Ryan, an analyst with market researcher Dataquest Inc., a unit of Gartner Group. "The move puts the company in step with the trend, which is the delivery of optical solutions in MANs (metropolitan area networks designed for cities or towns)."
Lucent has not succeeded in developing such networking technology in-house, Tratz-Ryan added.
The optical network market is a seen to be a lucrative one, since for corporate users, optical networks could mean more robust connections to public and private network backbones, as well as faster connections between buildings, across metropolitan areas and to data centers maintained by independent network service providers. Also, with site-to-site optical switching over fiber-optic cable, remote servers can respond as quickly as if they were local.
Last month, Lucent signed a deal with Global Crossing to help build a next-generation global optical network, connecting more than 200 cities on five continents and giving Global Crossing first use of new Lucent products, including Lucent's WaveStar LamdaRouter.
According to Lucent, WaveStar is the first commercially available, high-capacity, all-optical switch. Lucent will be the primary operator of the network.
According to Lucent, the acquisition of Chromatis is expected to be finalized by June 30, and Chromatis' current chief executive officer, Bob Barron will continue to work at Lucent, though the company did not disclose his new title.
For 1999, Lucent recorded $US38.3 billion in revenue, compared with $US21 billion posted by rival Nortel Networks Corp. and $US23 billion by rival Alcatel SA.