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Filed by Alteon
WebSystems, Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934
Subject Company: Alteon WebSystems, Inc. -- Commission File No: 000-27247
Information Distributed by Alteon WebSystems, Inc. to Its Employees Regarding
the Expected Merger with Nortel Networks Corporation
August 18, 2000
IDCFLASH
Nortel Networks Acquires Alteon to
Enhance Internet Datacenter Solutions
Analyst: Lee Doyle
IDC Opinion
What is the impact of Nortel's acquisition of Web switch specialist Alteon
WebSystems?
Nortel's acquisition fills a major weakness in its current product line in terms
of intelligent content switching. For its part, Alteon is a leader in content
switching, but it requires the resources of a giant, such as Nortel, to serve
global markets. Alteon's products make Nortel more competitive versus Lucent
(which requires something similar) and Cisco (which has just acquired
Arrowpoint) in the emerging Internet datacenter market. Nortel must quickly
integrate Alteon's content intelligent into its optical router and intelligent
edge product initiatives to make the most of this acquisition (and justify the
huge $7.8 billion price tag). The recent acquisitions of Alteon and Arrowpoint
indicate that there will be further consolidation in the space, with other
global infrastructure players bidding for the remaining intelligent switching
participants.
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Announcement Highlights
On July 28, Nortel Networks announced an agreement to
purchase Alteon WebSystems for an estimated $7.8 billion in
Nortel common stock. Nortel plans to run Alteon as an
independent business unit (like Shasta). It will report to
Nortel chief operating officer (COO) Clarence Chandran in
the Service Provider group. Dominic Orr, president and chief
executive of Alteon, will become president of Nortel's
Content Distribution Network business unit after the deal is
completed. Alteon is a leading player in the Intelligent
Content Networking market and provides its Web switches to a
number of top service providers and ebusiness sites.
IDC Analysis
Nortel's Datacenter Network Strategy
Nortel positions the acquisition as the cornerstone of its
strategy to be the leading provider of Internet datacenter
solutions. In addition to the Alteon products, this solution
set includes:
. Storage via a partnership with EMC
. Switching with Passport 8600
. Optical networking with OPTera
. Caching via the infolibria partnership
. Systems integration
A key issue for the merger is the ability for Nortel and
Alteon to develop synergies between their product lines.
Today, Nortel/Alteon announced two product development
initiatives:
. Integration of Alteon Web switch functionality into the
packet processors of the OPTera optical switch family.
Slated for introduction during 2001, Nortel plans to
provide an Alteon blade into the OPTera Packet Engine
platform to provide layer 4-7 content functionality at
optical speeds through OC-192 and potentially higher.
. Migration of Shasta (VPN and subscriber management
functionality) and Alteon content intelligent to a high-
performance intelligent edge platform based on the
Passport 8600. This is also expected to be available
during 2001.
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The ability to integrate the Alteon product line into the broad Nortel product
family and actually deliver on the two product initiatives mentioned above will
be critical to the success of this merger. This leverage is especially critical
given the huge premium Nortel is paying for a company with only $100 million or
so in revenue.
Impact for Alteon
Alteon WebSystems is a leading provider of intelligent content switches. Alteon
has a broad product line and a strong installed base of customers. The key
strengths of Alteon's products include:
. Strong performance and scalability
. Distributed processing architecture
. Good layer 4-7 feature set
. Full range of products
Alteon's key challenge is in its ability to provide high touch sales and service
to a range of global service provider clients and prospects. While Alteon has
grown rapidly, as an independent company it does not have the resources to
compete worldwide against Cisco/Arrowpoint from the standpoint of financial
resources, direct sales, service and support, and systems integration.
Nortel's financial strength, large direct sales force, and ability to provide a
broad solution to its service provider customers should be an immediate benefit
to Alteon.
Competitive Impact
For Nortel, the acquisition of Alteon clearly improves its competitive position
in Internet datacenters. Alteon fills a large hole in Nortel's product line,
specifically around the large emerging market for Intelligent Content (layer 4-
7) switching. The acquisition improves Nortel's ability to compete against Cisco
(which has been busy in the space with the acquisition of Alteon rival
Arrowpoint and a number of partnerships [e.g., EMC]). The company was left out
in this dance of $7 billion plus acquisitions in Lucent. Lucent has an OEM
agreement with Alteon specifically to provide a key piece of its Internet
datacenter solution. IDC believes that Lucent will unlikely remain a leading
Alteon OEM partner given the Nortel acquisition.
The recent acquisition of Arrowpoint and Alteon will serve to increase the
attractiveness of several other players in the Web switch field including F5,
Foundry, Extreme, CyberIQ, and Radware. Large equipment providers (e.g., Lucent)
with designs on the Internet datacenter market may feel compelled to make their
own acquisitions.
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Document #: 22805
Publication Date: August 2000
Published Under Services: Data Center Networks; Service
Provider Infrastructure; Enterprise Networks
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Caution Concerning Forward-Looking Statements
This filing contains certain statements that are based on Alteon's present
expectations of future events. These statements are "forward-looking statements"
within the meaning of the safe-harbor provisions of the U.S. federal securities
laws. These forward-looking statements are subject to risks and uncertainties
that could cause actual results or outcomes to differ materially from those
contemplated by present expectations. Factors that could cause or contribute to
such differences include, but are not limited to, risks relating to: the
consummation of the contemplated merger involving Alteon and Nortel Networks,
such as the risk that the companies may not obtain the required regulatory
clearances or stockholder approval in a timely manner or at all; the timing and
successful completion of technology and product development efforts; integration
of the technologies and businesses of Alteon and Nortel Networks; and changing
relationships with customers, suppliers and strategic partners.
These and other risks associated with the businesses of Alteon and Nortel
Networks that may affect their operating results are described in the most
recent Form 10-Q, most recent Form 10-K and other periodic reports filed by
Alteon and Nortel Networks with the Securities and Exchange Commission.
Additional Information About the Merger
Alteon expects to mail to its stockholders a proxy statement/prospectus
containing information about Alteon, Nortel Networks and the Merger. In
connection with the Merger, Nortel Networks plans to file a registration
statement on SEC Form S-4. Investors and security holders are urged to read the
registration statement and the proxy statement/prospectus carefully when they
become available.
Alteon will be, and certain other persons may be, soliciting proxies from
Alteon's stockholders in favor of the adoption of the merger agreement. The
directors and executive officers of Alteon and the directors and executive
officers of Nortel Networks may be deemed to be participants in Alteon's
solicitation of proxies. Information regarding the participants in the
solicitation and a description of certain interests the directors and executive
officers of Alteon have in the Merger is contained in the document filed with
the SEC by Alteon pursuant to Rule 425 on July 28, 2000.
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How to Obtain Documents from the Securities and Exchange Commission
In addition to the registration statement and the proxy statement/prospectus,
Alteon and Nortel Networks file annual, quarterly and other periodic reports,
proxy statements and other information with the SEC. You may obtain free copies
of these documents, as they are filed, through the website maintained by the SEC
at http://www.sec.gov.
You may read and copy any reports, statements or other information filed by
Alteon or Nortel Networks with the SEC at the SEC public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549 or at any of the SEC's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Alteon's and Nortel Networks' filings with the SEC are also available through
commercial document-retrieval services.
How to Obtain Documents from Alteon
Free copies of the proxy statement/prospectus and other documents, when they
become available, may also be obtained from Alteon by directing a request
through the Investors Relations portion of Alteon's website at
http://www.alteonwebsystems.com or by mail to Alteon WebSystems, Inc., 50 Great
Oaks Blvd., San Jose, CA 94119, attention: Investor Relations, telephone: (408)
360-5500.
