Nortel acquires Bay, expects fed sales growth

Convergence of some of the government’s voice, video and data networks influenced
Northern Telecom Inc.’s $9.2 billion acquisition of Bay Networks Inc. of Santa Clara,

Although federal sales accounted for only 5 percent of Bay revenues last year, the
government has always led the race toward convergence, said Barry J. Morris, Bay’s
director of federal operations. That implies future federal demand for end-to-end networks
that are IP-optimized.

Bay will operate as a Nortel subsidiary, and Nortel’s enterprise data networks
division has been folded into Bay operations. Nortel plans to use Bay products to
integrate its telecommunications backbone with enterprise networks.

The two companies anticipate public backbones will pick up an increasing volume of IP
traffic, which has surged on the public switched telephone network.

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