Nortel Networks to Acquire CoreTek For Up to $1.43 Billion

Nortel Networksspree continues for <%=company%> (Brampton, ON), with the company snapping up vertical-cavity surface-emitting (VCSEL) laser manufacturer CoreTek (Wilmington, MA) on the heels of its acquisition of Xros (see Nortel Steps Into MEMS Switching with Xros Acquisition). Under the terms of the agreement, Nortel will purchase the company for $1.43 billion in Nortel Networks common shares on a fully diluted basis, a portion of which is contingent upon CoreTek achieving certain milestones.

CoreTek manufactures 10 Gb/s indium phosphide (InP) based VCSELs fitted with micro-electro-mechanical systems (MEMS) micromirrors to provide tunability (see MEMS Components Yield Tunable VCSELS). Nortel expects the technology to play a key role in its much-touted "all-optical Internet of tomorrow."

The company will be folded into Nortel's optical networks group, but the details of name and reporting structure are yet to be determined. The company will remain at its current facility under the leadership of current president and CEO Parviz Tayebati, says Tom Dudley, vice president of marketing for CoreTek. "The intention is for us to be an OEM vendor of optical components," he adds.

Interestingly, Dudley sees little overlap between CoreTek and Xros, despite the fact that the two are nominally working with MEMS technology. "It's a completely different process," he notes, comparing the mirror on deformable membrane approach in InP of CoreTek to Xros's arrays of free-space silicon mirrors. "We do all the fabrication in house. It's fully vertically integrated, from devices to packaging to subsystems."

Subject to the usual approvals, the transaction will close by the second quarter of 2000. It is expected to be marginally dilutive to Nortel Networks earnings per share in calendar year 2000 and accretive in calendar year 2001 (excluding acquisition-related charges). Based upon a Nortel Networks share price of US$119.75, the acquisition will result in Nortel Networks issuing approximately 8.9 million Nortel Networks common shares on a fully diluted basis at closing. Up to an additional US$361 million in common shares would be issued upon CoreTek achieving certain milestones.

Edited by Kristin Lewotsky