News Release Nortel Networks Logo
www.nortelnetworks.com
FOR IMMEDIATE RELEASE July 28, 2000
For more information:
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Business Media Trade Media Investor Relations
David Chamberlin Melissa Zipin Nortel Networks
Nortel Networks Lois Paul & Partners 888-901-7286
972-685-4648 781-238-5726 905-863-6049
[email protected] [email protected] [email protected]
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Nortel Networks to Acquire Alteon WebSystems for US$7.8 Billion - Will Establish
Leadership Position in Delivering High-Performance Internet Data Centers for the
New Networked Economy
Internet Data Centers "Come Together" with Optical Internet, Wireless Internet
and eBusiness to Create High-Performance, Content-Aware Networks
BOSTON -- Nortel Networks* [NYSE/TSE: NT] announced a definitive agreement
whereby Nortel Networks will acquire San Jose, Calif.-based Alteon WebSystems,
Inc.* [NASDAQ: ATON], the leader in content aware switching, positioning Nortel
Networks as the leader in delivering high-performance Internet data centers.
Nortel Networks will pay an estimated US$7.8 billion in its common shares for
Alteon WebSystems on a fully diluted treasury stock basis.
The acquisition will enable Nortel Networks to build the next generation
Internet data center - capable of delivering content at unprecedented levels of
speed, efficiency and reliability. Nortel Networks will be in a position to
offer a complete Internet data center solution by integrating Alteon WebSystems'
content aware switching products with Nortel Networks' service offerings in
storage, gigabit switches, professional services, hosted application
management/delivery and caching.
The acquisition will also give Nortel Networks first-mover advantage in
integrating Internet data centers with the high-performance optical and 3G
wireless Internet delivering unparalleled, edge-to-edge broadband solutions.
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"In the new economy, the value and richness of content across the Internet is
increasing on a massive scale," said Clarence Chandran, Chief Operating Officer,
Nortel Networks. "Our acquisition of Alteon WebSystems will accelerate the
delivery of an Internet data center capable of moving content seamlessly and
rapidly across high-performance optical Internet and 3G wireless networks."
With its massively distributed architecture, robust software capabilities,
marquee customer base, deep market penetration and dramatic revenue growth,
Alteon WebSystems is the leader in the expanding market for content switching -
forecast by International Data Corporation (IDC) to grow to more than US$4
billion by 2004 from US$203 million in 1999. Alteon WebSystems leverages this
opportunity with innovative content switching technology that enables companies
to process, track and intelligently direct Web sessions at gigabit rates while
applying sophisticated traffic control services to each session.
"Alteon WebSystems and Nortel Networks share a common vision of high performance
content delivery services that exploit the high-performance Internet and create
new profit opportunities for service providers," said Dominic Orr, president and
Chief Executive Officer, Alteon WebSystems, Inc. "The possibilities of
integrating our intelligent content switching with Nortel Networks' optical
networking and 3G wireless Internet technologies are limitless."
Alteon WebSystems, the market share leader in Layer 4-7 Web switching market
according to the Dell'Oro Group, posted revenue of US$51.5 million for the
quarter ending June 30, 2000 - an increase of 82 percent from the previous
quarter. Based on worldwide revenue, Dell'Oro estimates that Alteon WebSystems
holds 50 percent of the global content aware switching market in Layer 4-7
switching, and 81 percent of the gigabit Ethernet segment.
Alteon WebSystems' customer base includes first-movers in the enterprise and
leading-edge service provider markets including Yahoo!, Excite@Home, Buy.com,
NTT, DLJDirect, CitySearch-Ticketmaster Online, Exodus Communications,
Loudcloud, Digex, ISPs UUNet, Cable & Wireless, Virgin, Global Crossing, ICG
Communications, GTE Internet, Concentric Networks and Microsoft WebTV.
Upon completion of the transaction, Alteon WebSystems will become a wholly owned
subsidiary of Nortel Networks. Alteon WebSystems will continue to be
headquartered in San Jose, California. President and CEO Dominic Orr will become
the president of Nortel Networks' Content Distribution Networks business unit.
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Under terms of the agreement, Alteon WebSystems shareholders will receive a
fixed exchange ratio of 1.83148 Nortel Networks common shares for each share of
Alteon WebSystems common stock. Based on the closing price of US$78.625 per
common share of Nortel Networks on Thursday, July 27, 2000, this represents a
price of US$144 per share of Alteon WebSystems and a price of US$7.8 billion for
the common shares of Alteon WebSystems on a fully diluted treasury stock basis.
The acquisition (excluding acquisition related costs) is expected to be neutral
in calendar year 2000 and slightly accretive in calendar year 2001 to Nortel
Networks earnings per share from operations.
The transaction, which is expected to close in the fourth quarter of 2000, is
structured to be tax-free to Alteon WebSystems' United States shareholders.
The boards of directors of both companies have approved the transaction. The
completion of the transaction is subject to customary regulatory approvals and
the approval of Alteon WebSystems shareholders.
Credit Suisse First Boston Technology Group acted as financial advisor to Nortel
Networks for this transaction and Lehman Brothers represented Alteon Web
Systems.
Alteon WebSystems pioneered the concept of Web switching and is a leading
provider of next generation Internet infrastructure solutions designed to enable
eBusinesses to meet the demands resulting from the rapid growth of the Internet.
The company's Web data center products including Web switches, server adapters
and traffic management software are optimized to meet the specific challenges of
managing Web traffic and provide the high performance and availability of
leading networking infrastructure solutions. Founded in May of 1996, Alteon
WebSystems employs a staff of approximately 500 around the world and is publicly
traded on the Nasdaq Stock Market under the symbol "ATON."
Nortel Networks is a global Internet and communications leader with capabilities
spanning Optical, Wireless, Local Internet and eBusiness. The Company had 1999
U.S. GAAP revenues of US$21.3 billion and serves carrier, service provider and
enterprise customers globally. Today, Nortel Networks is creating a
high-performance Internet that is more reliable and faster than ever before. It
is redefining the economics and quality of networking and the Internet,
promising a new era of collaboration, communications and commerce. Visit us at
www.nortelnetworks.com.
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Certain information included in this press release is forward-looking and is
subject to important risks and uncertainties. The results or events predicted in
these statements may differ materially from actual results or events. Factors
which could cause results or events to differ from current expectations include,
among other things: the impact of price and product competition; the dependence
on new product development; the impact of rapid technological and market change;
the ability of Nortel Networks to make acquisitions and/or integrate the
operations and technologies of acquired businesses in an effective manner;
general industry and market conditions and growth rates; international growth
and global economic conditions, particularly in emerging markets and including
interest rate and currency exchange rate fluctuations; the impact of
consolidations in the telecommunications industry, the uncertainties of the
Internet; stock market volatility; the ability of Nortel Networks to recruit and
retain qualified employees; and the impact of increased provision of customer
financing by Nortel Networks. For additional information with respect to certain
of these and other factors, see the reports filed by Nortel Networks with the
United States Securities and Exchange Commission. Nortel Networks disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Investors and security holders are advised to read the proxy
statement/prospectus regarding the transaction to be filed with the Securities
and Exchange Commission by Nortel Networks and Alteon WebSystems, as it will
contain important information. Security holders may obtain a free copy of the
proxy statement/prospectus (when available) and other related documents filed by
Nortel Networks and Alteon WebSystems at the Commission's website at
www.sec.gov. When available, the proxy statement/prospectus and the other
documents may also be obtained from Nortel Networks Corporation, Attention:
Investor Relations 8200 Dixie Road, Suite 100 Brampton, Ontario L6T 5P6 Canada
Alteon WebSystems, its directors, executive officers and certain other members
of Alteon WebSystems' management and employees may be soliciting proxies from
Alteon WebSystems' stockholders in favor of the merger. Information concerning
the participants will be set forth in the proxy statement/prospectus when it is
filed with the Securities and Exchange Commission.
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*Nortel Networks, the Nortel Networks logo and the Globemark are trademarks of
Nortel Networks.
