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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 www.nortel.com
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 www.nortel.com. For the latest Nortel news, visit
www.nortel.com/news.
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
www.garnetthelfrich.com.
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.

Contact:

Kim Milosevich, Tel: +1-415-345-4734, kim@outcastpr.com, Patti
Vernon, Tel: +1-905-863-1035, patricve@nortel.com

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