Nortel and Bay to fuse ranges

Nortel intends to offer end-to-end IP integrated networks using Baynew category of company'. Networks' data networking products and the telco's voice kit, following its $9.1bn (#5.5bn) acquisition of Bay Networks.

The combined technology will carry voice, data and video from desktops across Lans, Wans and carrier backbones. John Roth, Nortel president and CEO, believes the deal will create a "whole new category of company".

When the deal is closed in September, Bay will operate as a wholly owned subsidiary of Nortel, keeping its own brand. The company claimed it is "business as usual" until then and promised continued support for its existing product range.

Nortel, however, refused to deny that none of Bay's products would be canned.

David House, Bay CEO, who will become president of the combined company, said: "There will be no change for users. The products we have we'll keep. If anything, there will be better product support."

Analysts believe that the deal will help Bay regain its technical foothold, but they were concerned about users' welfare during the difficult integration period.

Clive Longbottom, strategy consultant at CSL Consultancy, believes it will change its direction. "Bay sells items rather than solutions at the moment. Nortel will bring it towards the high end of data integration before it forces them back down again," he said.

"Bay will probably pull out of low-end products like its Net Gear and its 10MB hubs because Nortel will be looking for higher margins. Nortel will shake them up a lot.

"Quite a few heads will have to roll because Bay was resting on its laurels over technologies like Gigabit Ethernet."

House dismissed any question of cultural conflict. He said: "The last few months were like a Woodstock-type experience, with people resonating against each other."

However, the combined forces of Bay and Nortel's networking business still amount to less than half of Cisco's turnover.

Rivals Cisco and 3Com were cynical about the deal, but both companies felt it endorsed their own voice/data strategies.

Cisco, which rebuffed approaches from Lucent, also a contender for Bay, signed a voice/data agreement with US carrier Sprint last week.

Richard Freemantle, Cisco vice president of EMEA, said: "If Bay and Nortel get their acts together, they will be a significant competitor, but they will have a not inconsiderable challenge integrating the companies. Big acquisitions like this mostly fail."

However, the three months before closure is a long time in IT. One disgruntled Bay shareholder, Gitty Rosenberg, has filed a lawsuit against Bay, complaining about the "inadequate takeover premium over Bay's stock price immediately prior to the announcement".

VOX POX

"Our customers' product management and support won't be affected. Otherwise it would be commercial suicide for Bay," said Eric Davison, principal consultant for Bay-only reseller LanBase.

"We're aware of voice/data trends, but have felt it's too young to implement yet. With the two camps coming together, we might look again," said Bay and Nortel user Paul Wilkinson, computer services manager at law firm Denton Hall.

"It will be a period of confusion for users if Bay and Nortel have to spend too much time looking inward," said Nigel Hawthorn, 3Com's European product manager.

PRODUCT OVERLAPS

- Bay's Optivity vs Nortel's INM

- Bay's Versalar 1500 vs Nortel's Aptis

- Bay's Accelar vs Nortel's Passport.