Nortel teams with Sierra, Xircom for 3G modems

date: 19th December 2000

Nortel Networks Corp. said on Monday it is teaming up with Sierra Wireless and Xircom to develop high-speed wireless modems by the second-quarter of 2002, in time for the launch of next-generation, or 3G, wireless networks in Europe.

Nortel will contribute an unspecified amount of ``seed capital'' to the partnership to develop modems that are capable of sending and receiving data at speeds of 2 megabits per second while stationary and 384 kilobits per second when users are mobile.

``There is always a limited supply of these new wireless devices so everyone scrambles to get their hands on them. So we are securing supply up front for our partners,'' said Peter MacKinnon, Nortel's vice-president of wireless Internet.

MacKinnon said Nortel's financial and technical contribution will shave 12 to 18 months off the devices' time to market, and give the telecommunications equipment supplier an edge in securing lucrative contracts to build 3G networks.

More than 42 licenses for 3G (third generation) networks built on the Universal Mobile Telecommunications System (UMTS) standard have been awarded or will be awarded in Europe, while 20 licenses are in the process of being auctioned in the Asia-Pacific region, said Sierra.

UMTS networks will enable the high-speed wireless transfer of bulky data files to cellular phones, handheld organizers, laptop computers, digital cameras and MP3 music players.

Nortel's shares slipped C$2.70 to C$55.90 on the Toronto Stock Exchange and fell $2-3/46 to $36-1/2 on the New York Stock Exchange at midday on Monday amid a weak market for technology stocks.

Burnaby, British Columbia-based Sierra, which is also developing similar products with Lucent Technologies, said the co-development deal with Nortel will affect revenues in the second-quarter of 2002 but will have no effect on expenses or earnings in 2001 or the fourth-quarter of 2000.

``This will accelerate the time to market of UMTS products in general and we will be at the forefront of bringing those products to market,'' said Peter Roberts, Sierra's chief financial officer, in a conference call with financial analysts.

Sierra's shares rose C$4.25, or 12 percent ,to C$78.25 on the Toronto Stock Exchange on Monday, and now sit at about one-third of their year high of C$232. On Nasdaq the shares gained $2-13/16 to $51-3/8 in midday trading.

In the past few months Nortel has announced contracts worth about $1.8 billion to build 3G wireless networks in Britain and Spain.

MacKinnon said network operators like BT Cellnet are asking suppliers such as Nortel how they will help in securing sufficient quantities of 3G capable devices, which are expected to add to the network's incremental revenue per customer.

"This is part of a network's qualification process in terms of selecting a vendor and this will better position us for even more business beyond the $1.8 billion we have already secured,' added MacKinnon.

The companies expect market trials of the modems in early 2002 with general availability around the same time.

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