Network specialist Radware ( RDWR - Get Report) has swooped down to buy part of Nortel's ( NT) switch business, as the troubled telecom equipment manufacturer attempts to put its house in order. The asset purchase agreement finally ends speculation that the Israeli firm was poised to grab some of Nortel's products. Rumors emerged last month that Radware was targeting Nortel's metro Ethernet Networks business, but is now acquiring the firm's Alteon enterprise switch family. Nortel, which recently filed for Chapter 11 bankruptcy protection while it restructures its business, suspended the sale of its key metro Ethernet Networks division earlier this month. Neither Nortel nor Radware has revealed the value of the Alteon deal, although the Canadian firm's enterprise offerings are widely regarded as the juiciest parts of its product portfolio. "This is to expand our customer and partner outreach," Radware COO Ilan Kinreich told TheStreet.com in a telephone call from Israel. "Alteon has a pretty strong brand and loyalty with customers, and we believe that, with our expertise, we can leverage that." With clouds of uncertainty still hanging over the tech sector, Radware seized the opportunity to strengthen its product arsenal against rivals such as Cisco ( CSCO - Get Report), Citrix ( CTXS - Get Report) and F5 Networks ( FFIV - Get Report), according to Kinreich. "We believe that this is a move that puts us in a stronger position in the market and will give us more growth in very challenging times," he says. The Alteon switches, which are used to relieve the strain on groups of servers, will eventually be offered under a merged brand, called Radware Alteon, and the Israeli firm is keen to win hearts and minds among the Nortel customer base.
Radware promised to invest "significantly" in service and support for the Alteon line, including a five-year product support plan. Although he would not go into specifics, Kinreich confirmed that a number of Nortel employees, mostly Alteon engineers and support specialists, will be moving over to Radware. "This move is a positive one for both companies and their respective customers and partners," wrote Cindy Borovick, research vice president at technology analyst firm IDC, in a statement. "It will provide a stable path forward for existing Nortel application delivery customers." The deal was particularly complicated given Nortel's current situation, according to Radware's Kinreich. "It was very complex," he explained. "We had to deal with three courts in three jurisdictions and many more lawyers than you would imagine." Radware nonetheless hopes to complete the acquisition sometime between the end of March and mid-April although Kinreich explained that the deal is still subject to court approval. The next few months will certainly be crucial for Nortel, which has been wrestling with plummeting sales of its wireless gear and recently discontinued its mobile WiMAX operations in an attempt to further streamline its business. Ernst & Young, which is monitoring Nortel's restructuring, gave a glimpse into the company's overhaul in a recent report to the Canadian court. Cost-cutting efforts include a "detailed plan" for a reduction of Nortel's global workforce, a review of real estate, property and IT equipment leases and cuts in discretionary spending, it said. Nortel nonetheless claimed to have taken a major step on the comeback trail earlier this month when the Ontario Superior Court of Justice granted a request to extend the firm's creditor protection until May 1.
Nortel also obtained an order from the Canadian court allowing it to postpone its annual general meeting for shareholders. Despite its acquisition of Nortel's switch business, Radware's shares slipped 3 cents, or 0.53% to $5.58 in Friday trading, reflecting a broader dip in tech stocks that saw the Nasdaq fall 0.65%.