Radware Snares Division From Nortel For $18 Million

Nortel bought application delivery networking company Alteon WebSystems in 2000 for more than $7 billion in stock. Radware is now in the process of purchasing Nortel's Alteon assets for the paltry sum of $17.65 million, or about 0.2% of what Nortel spent nine years ago. How times have changed.

Nortel has long since fallen onto hard times, last month finally filing for Chapter 11 bankruptcy protection. Nortel may continue selling assets as it struggles to stay alive. "Even before filing for creditor protection, it had become clear that Nortel would need to divest certain non-core businesses and assets," the company said in a bankruptcy court filing last week. However, it's not clear at all whether the sum brought by the sale of Alteon could do much to keep Nortel afloat.

In a press release last week, Nortel enterprise solutions president Joel Hackney hinted that the company would begin focusing more on communications than highly specialized data networking. Nortel has gotten high visibility from its unified communications strategy, which leverages partner relationships to sell Nortel IP communications hardware and software to businesses. The company announced plans last month to drop its WiMax business.

Nortel's Alteon division had fallen behind competitors like Radware, Cisco, and F5 Networks in the load balancing and more advanced application acceleration technologies it sells, but Radware will continue developing Alteon products. "We're going to continue to invest in the product lines and the technology," Radware CEO Roy Zisapel said in an interview. Radware will hire some Nortel support and research and development staff as part of the deal.

However, Zisapel admits Radware bought Alteon more for its customers and channel partners than for its technology. As part of the deal, Radware will offer a five-year support plan to existing Alteon customers. "Customers who may have been worried about the situation at Nortel can rest assured that their data center piece as it relates to Alteon is secure," Zisapel said.

It's unclear when the Radware deal will close, but one of the conditions of Nortel's bankruptcy case is that if another bidder comes along with a higher purchase price, Radware could still lose out on the acquisition of Alteon. That being said, Nortel admitted in a court filing last week that Alteon's price would likely continue to decline, so it may be unlikely another bidder offers more for Alteon than Radware has.

Radware had $94.6 million in revenue last year and counts 6,000 large enterprises and carriers among its customers. It focuses exclusively on application delivery networking -- application acceleration, availability, security -- and competes most heavily with Cisco and F5.

InformationWeek has published an independent analysis of data center strategies. Download the report here (registration required).v