Service Provider Networks / (none) /

Nortel buys access-gear maker Sonoma

By Jim Duffy
The Edge, 08/15/00

Nortel Networks Tuesday announced a definitive agreement to acquire Sonoma Systems, a maker of customer-premises access products employed by major carriers in their managed services.

The all-stock $540 million acquisition will enable Nortel to offer service providers an integrated- access service delivery platform for enterprises that is tightly tied to Nortel's optical gear in the core of carrier networks. Products such as Sonoma's usually provide slower T-1 "first mile" access to service-provider nets, Nortel and Sonoma officials say.

The carrier managed-services market is projected to reach $18 billion by 2002, Nortel says, citing data from The Yankee Group in Boston. The market is $10 billion this year, the company says. "The opportunity is explosive, and it's here and now," says Steve Schilling, president of Nortel's access networks group.

Sonoma had revenue of $7 million last year. The company was founded in 1998 and employs 128 people. The price Nortel is paying for Sonoma is in line with the value Sonoma would have enjoyed had it gone public, says company CEO Greg Koss.

Sonoma's products integrate Internet access, corporate data traffic, and voice and video services onto an ATM trunk to the public network. ATM link speeds include NxT-1 inverse multiplexing, DS-1, E-1, DS-3, E-3 and OC-3c.

The products compete with Ascend and Sahara products acquired by Lucent, and with managed-services products from Cisco.

Nortel and Sonoma have had an OEM arrangement since February. Nortel labeled its three Sonoma offerings the Universal Edge 600 series. Sonoma's OEM customers also include Nortel competitors Alcatel, Siemens and Cabletron. Sonoma will continue to support these customers and is placing the onus on breaking these engagements with them.

Nortel plans to add Sonoma technology to its Passport ATM switches, OPTera Metro optical switching and transport systems, and Succession packet voice gateways. Nortel also plans to integrate the subscriber management capabilities of its Shasta 5000 BSN routers with the Sonoma products.

Sonoma is headquartered in Marina del Rey, Calif., and has operations in Marlborough, Mass. Its customers include AT&T, WorldCom, Global One, Savvis and FiberNet.

The transaction is expected to close in the fourth quarter.