BOSTON - Nortel Networks* Corporation [NYSE/TSE: NT] announced that it has completed the acquisition of Sonoma Systems, a leader in delivering high-speed integrated video, data and voice communications simultaneously over a single connection.

The acquisition will position Nortel Networks to effectively tie the bandwidth and power of the high-performance Optical Internet to the access solutions of the Local Internet, which will allow service providers to deliver high-speed managed services to their business customers. The Yankee Group estimates that the market for delivering these carrier-managed services will reach more than US$18 billion globally by 2002, up from US$10 billion this year.

"This acquisition allows us to extend our high-performance Optical Internet leadership into the Local Internet," said Steve Schilling, president, Local Internet, Nortel Networks. "It's another proof point in our Local Internet strategy that enables service providers to offer new, profitable services such as high-speed Local Internet access, video services and Internet Telephony to business and consumers."

"Nortel Networks is leading the charge in delivering the high-performance Internet," said Gregory Koss, president and chief executive officer, Sonoma Systems. "As part of Nortel Networks, we are now focused on delivering integrated access devices that will allow our customers to efficiently and profitably extend new services as part of the Local Internet portfolio."
The acquisition was effected by the merger of a wholly owned subsidiary of Nortel Networks with and into Sonoma. As a result of the acquisition, approximately 4.8 million Nortel Networks common shares were issued in exchange for all of the issued and outstanding shares of Sonoma common stock and preferred stock, and approximately 1.3 million additional Nortel Networks common shares were reserved for issuance upon the exercise of outstanding Sonoma options and warrants that have been assumed by Nortel Networks. In addition, a maximum of US$72 million in Nortel Networks common shares may be issued to former Sonoma shareholders and option holders upon Sonoma achieving certain business objectives.

Sonoma Systems develops carrier-class broadband that allow service providers to deliver integrated services (Internet, voice, data and video) with class of service guarantees over a single, cost-effective access network. Sonoma Systems is headquartered in Marina del Rey, Calif., with a technology center located in Marlborough, Mass., and sales and support offices located throughout North America and in the UK.