Well, what do you know? Nortel has made an acquisition. In fact, it has bought a company that actually makes telecom equipment as opposed to a second-tier system integrator (PEC Solutions) that caters to a single vertical - the U.S. government. Nope, not this time. Nortel is spending $99.5-million for Tasman Networks, which makes IP routers for corporate customers. Without providing instant-analysis on whether the deal makes sense (I mean, do you really want to go head-to-head in the router market with Cisco and Juniper?), it is definitely encouraging to see Nortel finally make a strategic technology acquisition. You have to remember this is a company that has sat on the M&A sidelines for several years (excluding PEC, which gobbled up $448-million of cash earlier this year) as it grappled with an accounting scandal and a new CEO focused on what he knew best - the U.S. government, U.S. military and security. At a time when Nortel is trying to reduce spending and make its R&D more "efficient", the lack of strategic deals was puzzling when rivals such as Cisco, Lucent and Alcatel were buying cool start-ups. This is just another sign that new Mike Zafirovski is wasting no time putting his stamp on the company. It's also a sign Nortel's partnership with struggling router maker Avici is probably doomed. Tasman's investors include Harbinger, Mayfield Funds, New Enterprise Associates, Parker Price Venture Capital. However, according to Light Reading, the deal isn't a "home run" given Tasman raised $93 million in venture capital and went through several make-overs.
Update: The Motley Fool's Rich Smith thinks the Tasman deal is worth scrutinizing given the company has less than $10-million in sales, and Nortel is valuing it at 12.3 times sales.