When Acquisitions Bomb: Revisiting the Nortel-Bay Networks Deal

The VAR Guy was intrigued today when he read Mark Evans’ blog entry rehashing of Nortel Networks’ 1998 acquisition of Bay Networks. Evans wonders if Nortel would have been smarter to acquire someone else. The VAR Guy has a completely different view on the deal. Here’s the scoop.

Fact is, Bay Networks was broken before Nortel acquired the company for more than $9 billion. Anybody else recall that Bay Networks was formed by the merger of SynOptics (hubs and switches) and WellFleet (routers)? Bay Networks bombed from day one because of culural problems, distance issues (SynOptics was in Silicon Valley, WellFleet was in New England) and an aggressive, hyper-focused rival (Cisco Systems).

Alas, Nortel was a damaged company buying damaged VoIP goods in Bay Networks. Anyone can look back and say “what if” Nortel had decided to acquire someone else. But The VAR Guy believes Nortel would have botched any acquisition in the late 1990s and early 2000s. Even if Nortel made the right acquisitions, the deals would have yielded very little because Nortel destroyed itself — and its credibility — with accounting scandals during the dot-com implosion.

No use looking back. Time for Nortel to keep looking forward. The company has gained reasonable momentum in Unified Communications market, a growth market if ever there was one.

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