Nortel to Buy Xros:

Nortel Networks Corp., North America’s No. 2 phone equipment maker, agreed to buy Xros Inc. for $3.25 billion in stock, the latest in a flurry of acquisitions to gain fiber-optic technology.

Xros, a start-up based in Sunnyvale, Calif., is developing a switch that redirects beams of light from one piece of glass fiber to another using tiny mirrors. Nortel expects to begin selling the device next year, after completing the Xros purchase in the second quarter. Nortel is using its shares, which have quadrupled in the last 12 months, to snap up start-ups to gain products for optical networks and strengthen its hold as the biggest seller of fiber-optic equipment. Xros gives Nortel a device to compete with Lucent Technologies Inc., which has developed a similar product. Nortel shares rose $2.19 to close at $123.88 on the New York Stock Exchange.