Second time lucky

So Northern Telecom (Nortel) went and bought Bay Networks after all, did it?

Apparently, all that was needed was a little more money to sweeten the pot. Bay had reportedly turned down an offer of between $US32 to $US35 per share from Nortel.

Not one to be discouraged, Nortel took a little time to think -- and assess its financial wherewithal -- and came up with a better offer of slightly more than $US38 per share. That was enough to reel Bay in.

Although, to hear David House, Bay's chairman, CEO and president, talk about the negotiations between the two companies, it was a complete lovefest that led to the merger.

"We found we had to control our enthusiasm. It was almost a Woodstock-type experience," House is reported to have said about the pre-acquisition discussions.

A Woodstock-type experience? Haggling over one or two billion dollars? We don't think so. This acquisition, like any other, is about money. Pure and simple. And House has proved that any company is up for sale, if the price is right -- and circumstances necessitate it.

When he took over as Bay's top exec in October 1996, House said he would not sell the company. So what changed his mind?

"Business changes very quickly, particularly when you're living in the Internet," he said during a teleconference to announce the Nortel-Bay deal. "In the year and half I've been here, it's been like a decade in dog years or Internet years."

During that time, Bay rival Cisco Systems has managed to capitalise on the IP boom in both the enterprise and service provider markets. In order to compete in the end-to-end IP network market, Bay found it needed to find a telecom partner -- and fast.

It was looking as though that partner was going to be Lucent Technologies, but due to US regulations that stem from the company's October 1995 spin-off from AT&T, Lucent is essentially unable to make any major purchases until October of this year. That left the door open for Nortel to step in -- and step out with Bay, as it were.

What does all this mean for users? Well, if you're a Bay or Nortel customer, you now know who you're expected to go to for the other half of your data/voice networking gear in future.

If you use both Bay and Nortel equipment, you're sitting pretty. You should have one point of contact for all your network product complaints from hereon in.

If you are currently a Cisco user but are looking for an alternative supplier, you've probably found it in this match.

And finally, if you're a Cabletron/Digital, 3Com, Newbridge or Lucent customer ... wait for it. Your vendor is bound to get bigger (and better?) any month soon.

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