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Portfolio | Blade News

Reuters

February 13, 2006

Nortel sells blade server switch business

Toronto—Nortel said on Monday it will sell its blade-server switch business to a new company as the Canadian telecommunications equipment maker focuses on its core business.

Private equity firm Garnett & Helfrich Capital contributed an undisclosed amount of capital to the new company, Blade Network Technologies Inc., which will inherit and Hewlett-Packard Co. as customers from the Nortel unit.

“We have the luxury of starting live with those two customers working very closely with us,” Blade Network Chief Executive Vikram Mehta, former general manager of Nortel’s blade-server switch unit, said in an interview.

Nortel, which will have an undisclosed stake in the new company, contributed intellectual property and customer contracts. Terms of the transaction were not announced.

The new company will target annual revenue of $300 million to $400 million by the end of the decade, Mehta said.

Eric Schoch, Nortel’s vice-president of business development, said the sale was the first to be announced since chief executive Mike Zafirovski took charge of Nortel late last year.

“This transaction is consistent with our transformation strategy to very much focus on our core business, our core technology, as we take our business forward,” he said in an interview.

Zafirovski took charge of Nortel after it had put its bookkeeping scandal behind it, but was still struggling to rebuild its business.

Mehta said about 40 employees from Nortel had joined the new company, which would employ 40 more people in the next quarter or so.

A blade server is a thin, high-powered computer set on a small circuit board. It consumes less power and takes up less space than conventional servers, allowing more computers to be crammed into crowded corporate data centers.

Blade servers run corporate operations such as Web sites and business applications. The segment is seen as the fastest growing within the server industry.

(Additional reporting by Derek Caney)