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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
O U T F R O N T
www.forbes.com
[PHOTO]
First caption: Lighting Up Nortel/Nortel's $100 billion talks with Corning fell
through. No problem. There are plenty of other deals where that came from.
Second caption: "Cisco has a bigger market cap, Lucent has more sales ... If we
rise above them, we will invent a leader to fight against."
Third caption: John Roth, Clarence Chandran: If you want to build the network,
then you better shop around.
BY QUENTIN HARDY
JOHN ROTH'S OFFICE PC DISplays a live feed calculating Nortel Networks'
up-to-the-minute market capitalization. "We're up to $240 billion," the chief of
the come-from-behind Canadian telecom firm says with a grin. "Maybe I'll go buy
something."
Maybe something big. Not content with $11 billion in acquisitions so far
this year, Roth just struck a new deal to acquire Alteon WebSystems for $7.8
billion. He says he will spend 10% of Nortel's market cap--every year--to buy
the new technology he wants. That's um, another $24 billion next year, right?
"Maybe," Roth says, then hints it could go even higher. "Our market cap's been
going up."
Indeed it has. Nortel's value is up sixfold since Roth took over in 1997,
largely on its strength in optical networking. He vows to keep it that way.
Nortel stock has gone from $20 to $80 in just the past year, jumping in late
July on leaks that it might sell its optics business to Corning for a staggering
12-figure sum; $100 billion.
Sell off the company's sizzle? Not exactly--Nortel was looking at shedding
the low-margin bottom of its optical-components business, saving the jazziest
lines for itself.
The Corning talks faltered, but the morning after that news broke, Roth
unveiled his plan to buy Alteon, which makes Web switches and other Internet
trafficking hardware. It is an uncharacteristically high-profile pose for
Nortel, which doesn't get the ink and Web hype that Cisco gets, or have the
beloved following Lucent had before it tumbled.
Roth likes it that way. He poses Nortel as a digital David struggling
against corporate Goliaths. Tell him Nortel leads in optics, and Roth insists,
"Cisco has a bigger market cap, Lucent has more in sales, Ericsson is ahead of
us in wireless."
Then he adds: "If we rise above them, we will invent a [market] leader to
fight against."
Besides acquisitions, he will triple Nortel's e-business sales force to
3,000 in the next year to attack Cisco's turf: the world's largest 2,000
companies. For two decades Nortel focused mainly on carriers. Now it also woos
corporate customers as businesses set up their own high-speed networks.
52 F O R B E S . August 21, 2000
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Roth also wants Nortel in the undersea-fiber business in a big way,
possibly creating new service providers. In that pursuit a joint venture could
emerge with Tyco's new undersea-cable vehicle, TyCom, Ltd., which raised $2
billion in an initial public offering in late July.
Nortel's also will spend heavily on Internet applications software to be
sold with Nortel boxes for data centers. And it is pushing into high-speed
wireless and new products to extend optics to metropolitan networks and right on
down to office buildings.
Roth, 57, is an engineer who owns four high-performance cars because he is
addicted to mph numbers. Nortel is all about speed, too, measured in gigabits
per second, a.k.a. bandwidth. Get this: Sixty percent of Nortel's $7.8 billion
in second-quarter sales came from products less than 18 months old. That means
always looking for the next thing--and for ways to top its more glamorous
rivals.
Nortel sales force dreams of "marginalizing" Cisco. How could they
possibly? With new chip-based software, Nortel enables a cheaper semiconductor
device to perform the function of a small Internet router, supplanting costly
hardware of the sort Cisco sells. Roth's wireless Web plan, dubbed "Wings of
Light," takes aim at Ericsson and Nokia, since most of the early sales are in
Europe. Eventually the technology will hit the U.S., and the gunsights will
shift to Lucent and Motorola.
Those coming moves won't be the slam dunk that optical was, since now the
competition sees Nortel coming. Already, Cisco Chief John Chambers has told his
troops that Nortel is the real competitor they must target.
Nortel's new forays into corporate sales and wireless-Net gear are led by
Clarence Chandran, chief operating officer. He could succeed Roth as early as
next year. Chandran, 51, is not the technician Roth is, but he is every bit the
salesman. And tough: The son of a military officer, Chandran received multiple
stab wounds fighting off burglars on a business trip to Singapore in 1997.
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By the Numbers
Growing Plan
The boom in optical gear has given Nortel spectacular growth that comes from
focusing on new technology.
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$190 billion Increase in Nortel's market cap since John Roth became chief
executive in October 1997.
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60% Amount of Nortel's sales from products less than 18 months old.
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$19 billion New or completed acquisitions so far in 2000.
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Source: Nortel
These days he feels the urgency. "Our product-development cycle has gone
from 240 weeks to 24 weeks, and we can lay out a national network in 6 to 8
weeks," Chandran says. "We have to get even more Web-like--faster, resilient."
The same sense of urgency was behind the talks with Corning. Roth frets
that the recent buying binge in optics, including JDS Uniphase's pending
purchase of little-known SDL for $41 billion, is thinning the ranks of Nortel's
suppliers. Word of the Corning talks broke just as Roth set a $1.9 billion
expansion of Nortel's own components production. Either way, Roth was saying,
Nortel will not be constrained.
He sees fibermakers as stuck in the old, slow-moving telecom world. Yet
Nortel and Lucent are close to optical advances that will require better fiber
than ever before. Their prototypes could boost the number of channels a single
fiber can carry from 160 to up to 1,000. On each channel data could race at 80
gigabits per second, but to get where they are going, the data must travel on
purer glass.
The Nortel duo relies on a "disruptive technologies" team to figure out
where the next scientific surprise will come from. The group identified Qtera, a
shop that can send an optical signal 2,000 miles without amplification--40 times
the distance Nortel could muster. Nortel bought Qtera for $3 billion eight
months ago and deployed the design in a recent sale to Qwest Communications. It
will take center stage in Nortel's new undersea-fiber business.
The disruption goes on. Some small outfit may blindside Nortel with newer,
faster designs or steal some of its best minds with a pile of pre-IPO options.
Nortel already hires 10% of Canada's engineering grads and seeds money at
Canadian universities to nurture more optical engineers. Still, Chandran frets,
"Everyone is coming after us. We have to take winning the war on talent to the
next level."
Roth's briefcase holds a list of 519 Nortel executives, ranking top
performers and isolating slackers (73 of whom left last year, Roth boasts). He
is paying bonuses, sometimes equal to an annual salary, twice a year. In the
face of this much upheaval, only one thing could be riskier: standing still.
F O R B E S . August 21, 2000 53
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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.
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