Nortel Networks

Garnett & Helfrich Creates New Company From Nortel Blade Server Switch Unit

    Toronto, Canada and Menlo Park, California (ots/PRNewswire) -

    - Blade Network Technologies to Become Leading Provider of Network Infrastructure to the Blade Server Market

    Nortel(x) (NYSE: NT ; TSX: NT) and Garnett & Helfrich Capital today  announced the sale of certain assets of Nortel's Blade Server Switch  Business Unit (BSSBU) to a new company named Blade Network Technologies,  Inc.

    Garnett & Helfrich Capital, a private equity firm focused on venture buyouts (VBOs) contributed capital to Blade Network Technologies and is the controlling shareholder. The assets contributed by Nortel include intellectual property and customer contracts. Nortel received a minority interest in Blade Network Technologies, in addition to other consideration.

    David Helfrich, managing director of Garnett & Helfrich Capital, is the chairman of Blade Network Technologies' Board of Directors. Eric Schoch, vice president of business development, Nortel, is a board member. Vikram Mehta, a former general manager of Nortel's BSSBU, is president and CEO of Blade Network Technologies and a board member. Terry Garnett, managing director of Garnett & Helfrich Capital, is also a board member. The new company's headquarters is located in Santa Clara, California.

    "As a business in its own right, Blade Network Technologies will be well positioned to take advantage of a growing market," said Mike Zafirovski, president and CEO of Nortel. "In addition, this transaction is consistent with Nortel's business transformation strategy which includes focusing only on those technologies which are strategic to our core business."

    "Garnett & Helfrich Capital and Blade Network Technologies' management team will work to strengthen the leadership that Nortel established in the blade server market and ensure continued customer satisfaction," said David Helfrich. "Blade Network Technologies represents everything we seek when identifying investment targets - proven technology, a solid customer base, rich talent, and compelling growth prospects. Blade Network Technologies' acquisition of Nortel's BSSBU will create a well-capitalized, independent, and highly focused company, which we believe can better serve the rapidly growing needs of blade server vendors and their customers."

    According to IDC (1), blade server shipments will grow at a compound  annual growth rate (CAGR) of 57 percent through 2009 to reach US$10 billion,  making blade servers the fastest growing segment within the server industry.

    Blade Network Technologies assumes management of Nortel's BSSBU operations, including design, manufacturing and support of existing BSSBU blade server switches. In addition, certain products supplied by Blade Network Technologies will carry the Nortel brand or the "Solutions by Nortel" brand.

    "Blade server vendors and their customers have increasingly complex requirements for network blade server systems," said Vikram Mehta. "Our singular focus on the blade market - characterized by superb execution, time-to-market velocity, and our relentless pursuit of our customers' satisfaction - will set Blade Network Technologies apart in the marketplace. I am very excited to reunite with my BSSBU colleagues and work with the industry's leading blade server vendors to bring innovative blade server switching solutions to the blade computing environment."

    The systems in which Nortel's blade server switches are installed are used by Fortune 500 companies across 25 different industry segments. This transaction establishes Blade Network Technologies as one of the industry's first vendors to focus exclusively on serving the network infrastructure needs of the rapidly growing blade server market. The new company will be one of the largest suppliers of blade server switches with an installed base of more than 52,000 switches (representing approximately 1.1 million Gigabit Ethernet ports) around the world.

    About Nortel

    Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Our next-generation technologies, for both service providers and enterprises, span access and core networks, support multimedia and business-critical applications, and help eliminate today's barriers to efficiency, speed and performance by simplifying networks and connecting people with information. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at For the latest Nortel news, visit

    About Garnett & Helfrich Capital

    Formed in March 2004 with $350 million in capital from leading institutional investors, Garnett & Helfrich Capital is a $350 million technology-focused private equity fund. Garnett & Helfrich is focused on spinning out businesses from large global technology companies and growing them as focused, standalone businesses. Examples include Wyse Technology (world leader in thin-client computing) and Ingres (open source enterprise database company spun out from Computer Associates). More information is available at

    Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the outcome of regulatory and criminal investigations and civil litigation actions related to Nortel's restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel's results of operations, financial condition and liquidity, and any related potential dilution of Nortel's common shares; the findings of Nortel's independent review and implementation of recommended remedial measures; the outcome of the ongoing independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel's previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel's internal control over financial reporting and the conclusion of Nortel's management and independent auditor that Nortel's internal control over financial reporting is ineffective, which could continue to impact Nortel's ability to report its results of operations and financial condition accurately and in a timely manner; the impact of Nortel's and NNL's failure to timely file their financial statements and related periodic reports, including Nortel's inability to access its shelf registration statement filed with the United States Securities and Exchange Commission (SEC); the impact of management changes, including the termination for cause of Nortel's former CEO, CFO and Controller in April 2004; the sufficiency of Nortel's restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004 and December 14, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel's customers; increased consolidation among Nortel's customers and the loss of customers in certain markets; fluctuations in Nortel's operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel's cash flow, level of outstanding debt and current debt ratings; Nortel's monitoring of the capital markets for opportunities to improve its capital structure and financial flexibility; Nortel's ability to recruit and retain qualified employees; the use of cash collateral to support Nortel's normal course business activities; the dependence on Nortel's subsidiaries for funding; the impact of Nortel's defined benefit plans and deferred tax assets on results of operations and Nortel's cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel's dependence on new product development and its ability to predict market demand for particular products; Nortel's ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization and consolidation in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel's customers and the impact of customer financing and commitments; general stock market volatility; negative developments associated with Nortel's supply contracts and contract manufacturing agreements, including as a result of using a sole supplier for a key component of certain optical networks solutions; the impact of Nortel's supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; any undetected product defects, errors or failures; the future success of Nortel's strategic alliances; and certain restrictions on how Nortel and its president and chief executive officer conduct business. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    (x)Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

TORONTO, Canada and MENLO PARK, California, February 13 /PRNewswire/ --

    (1)Worldwide and US Blade Server 2005-2009 Forecast and 2004 Vendor Shares. IDC, July 2005.

ots Originaltext: Nortel Networks
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