Leave it to an arcane 19th-century Canadian patent law and an untimely death to lead to one of the world's largest providers of telecommunications products and global communications networks. Nortel's story begins north of the border in 1881 when Charles Fleetford Sise, a New England sea captain, arrived in Montreal to start The Bell Telephone Company of Canda. Sise got off to a rocky start: his domestic equipment supply was cut off when James Cowherd, operator of the world's first telephone manufacturing plant, died of tuberculosis. Worried that he would not find another supplier and would thus lose his Canadian patent rights, Sise decided to make his own telephone equipment. A year later, the Manufacturing Branch of The Bell Telephone Company of Canada was born, eventually becoming the Northern Electric and Manufacturing Company Limited in 1895.

For 50 years, Northern Electric primarily made telephone equipment for Bell Canada, not to mention a few television sets, radios, and police call boxes. With the introduction of the electronic telephone switch during the 1960s, Northern Electric and Bell Canada decided to combine their research and development divisions and get a jump start on the rapidly changing telecommunications market. The new R&D entity, now called Northern Telecom, developed its first electronic switch, the SG-1, in 1972 and went on to sell some 6,000 units during the next three years. But the electronic switch quickly became outdated with the arrival of digital technology. Northern Telecom sold its first digital switch in 1977. With the breakup of AT&T five years later, the company witnessed a decade of explosive growth. The company is now called Nortel Networks.

Beyond the telephone

Throughout much of the 1990s, Nortel has sought to reinvent itself as not merely a maker of telephone equipment but a leader in global communications and data networking technology. Taking advantage of the deregulation of the telecommunications industry in 1996, Nortel, along with rival Lucent Techonologies, has sought to supply telephone companies with intergrated networks, carriers, and switches that can transmit packages of voice/video/Internet data over traditional phone lines. In 1993, the company announced its Magellan portfolio which identified emerging multimedia markets in the United States and Europe.

International expansion

Today, the U.S. accounts for 60 percent of Nortel's sales; and like most other telecoms, the company is actively pursuing markets in Asia and Latin America. In 2000 Nortel scored a $240 million contract to expand its network of voice, internet, and data services into Latin America. This goes along with its various supply contracts and agreements in Mexico and Chile. Nortel also established Nortel Networks Isreal in 2000, where internet usage has doubled every year since 1994. Realizing the need to compete more effectively with Lucent and Cisco Systems, Nortel recently formed a strategic alliance with Microsoft Corporation to jointly market high-speed Internet modems. Nortel also purchased Aptis Communications, which specializes in remote-access Internet and telephone switches.

The Bay acquisition - and restructuring

In June 1998, Nortel bought Bay Networks, Inc. in a highly publicized $7.68 billion deal. By acquiring Bay Networks, the company was able to provide corporate customers with data management equipment such as Intranet servers. However, some people have questioned the move because Bay Networks, itself the product of a difficult merger, had struggled to turn a profit and had little experience in the fast growing public carrier market, an area some analysts say Nortel should be paying attention to. Despite lower than expected growth in 1998, Nortel officials insisted they would make the merger work. The company cut 3,500 jobs worldwide and restructured its operations to do so. Under the plan, Nortel divided its data networking business into two units: one deals with telephone companies and the other with corporate customers.

Forward-looking acquisitions

When Nortel announced in December 1999 that it would acquire the privately-held Qtera - a company with no revenue, no customers, and a product still in the testing stages - analysts applauded the decision. The $3.25 billion stock-for-stock deal was struck because Qtera was developing an optical communications technology that allows fiber optic cables to transmit and carry signals farther than usual. The company hopes that the acquisition will help expand Nortel's optical fiber offerings and its telecommunications capacity. The optical network of the future will come about thanks to Nortel's acquisitions of CoreTek (for $1.43 billion), Photonic Technologies (for $35.5 million in cash), and Xros. With the addition of these companies, Nortel has the technology and components to make the dream of all-optical internet access a reality. Nortel also invested $400 million globally to increase optical production capacity. Continuing its acquisition binge, in 2000 Nortel announced that it will spend $224 million to build and operate a broadband network for German wireless communications company Star One. After one year, Nortel will then transfer the operational responsibilities to Star One.

Not satisfied with just these acquisitions, the company also moved to purchase telecommunications software developer Architel Systems Corp. in an all-stock deal worth about $395 million. If the deal goes through, it allows Nortel to expand its Preside line of Internet service products. Preside allows virtual private networks or electronic commerce Web sites to work with any type of network including cable, optical or wireless. The boards of both Nortel and Architel still have to approve the deal, which is also subject to the consent of regulators, the courts and two-thirds of Architel shareholders.

The buying binge still not complete, Nortel went on to acquire e-business solutions company Clarify Inc., DSL platform developer Promatory Communications Inc., and Periphonics Corporation, a call center company. Not to be thought of as a mere acquisition-crazed company, Nortel is spinning off Channelware Inc., to join the successful Entrust Technologies Inc. and Elastic Networks, which both began in development at Nortel.

Nortel embarked into uncharted territory by creating a way to access wireless internal and external networks as well as wired networks from a single PCS phone. This eliminates the need for separate wired and unwired phones, pagers, and cell phones, as a person can begin a conversation within the Nortel building and end it hundreds of miles away without interruption. The network can also carry digital and future internet-based applications.

An optical investment