Nortel Agrees to Buy Qtera in Bid to Outflank Rivals

Nortel Networks Corp. said Wednesday that it agreed to buy Qtera Corp. for as much as $3.25 billion in stock to gain a product that speeds phone calls and data on high-speed networks.

Qtera, a closely held Boca Raton, Fla.-based company with no sales, developed a product that allows phone and data traffic to be sent on fiber-optic networks at lower cost.

Nortel wants to outmaneuver rivals Ciena Corp., which is developing similar technology, and Lucent Technologies Inc. as telecommunications companies seek to carry data faster and more cheaply.

Nortel raised its bid after Cisco Systems Inc. made overtures to Qtera, people familiar with the negotiations said.

Qtera’s founder and chief executive, Fahri Diner, said Nortel was the most desirable partner. He declined to say whether other companies made offers.

The acquisition keeps Nortel ahead of Cisco, which is aggressively moving into optical networking and last month said it could buy a company like Qtera in the next 12 to 18 months. Qtera had discussions with Cisco and turned down two lower offers from other companies, people familiar with the matter said. Cisco declined to comment.

“Anyone who has anything of value is going to be looked over by everybody,” said Barry Jaruzelski of consultant Booz-Allen & Hamilton Inc. “You run a risk by hesitating.”

Qtera’s staff of 170 and management will keep their jobs as part of a new business unit at Nortel.

Shares of Brampton, Canada-based Nortel rose 56 cents to close at $88.63 on the New York Stock Exchange.

Nortel said the acquisition won’t cut earnings per share next year and will boost them in 2001. The final price will depend on Qtera meeting sales and profit targets. Nortel said it will issue 30 million to 48 million shares to buy the company.