Nortel shells out $3.25 billion for optical switch maker Xros

March 15, 2000

Nortel Networks has agreed to pay $3.25 billion for Xros Inc. (Sunnyvale, CA), a startup making a photonic switch based on micro-mirror technology. The purchase is the third in the past four months for Nortel, which is engaged in an increasingly expensive battle with other networking companies trying to dominate the expanding market and become the first to offer the all-optical Internet.

Xros' X-1000 switch won Best of Show at last week's Optical Fiber Communications conference in Baltimore, MD. The X-1000 is capable of arbitrarily connecting up to 1152 pairs of inputs and outputs with an all-optical pathway from each input to each output. The all-optical pathway makes the cross-connect completely independent of the transmission speed and the underlying protocol of the data.

With the X-1000, Nortel will be able to compete with optical switch makers Lucent Technologies and Agilent Technologies. Lucent trumped Nortel by unveiling its micro-mirror optical switch, the WaveStar LambdaRouter, last fall. Agilent introduced its own photonic switch last week. With its purchase of Xros, Nortel has struck back, or at least entered the contest.

Greg Reznick, Xros president and CEO, says that his company's switch is superior to its competitors. "The Agilent technology is based on a device that can be in one of two positions," he says. "Our device can be in one position out of a large number of positions, so that you can switch light to any of a large number of places. That is similar, in fact, to the approach Lucent is using. While we respect their approach, we believe that we have a very robust technology that will scale farther."

Xros' technology is designed to operate at 10 Gbits/sec, as well as the future speeds of 40 Gbits/sec and 80 Gbits/sec, capabilities that Nortel Networks has announced for introduction to the marketplace next year.

Reznick explains the benefits of the optical switch in terms of scalability: "Scale is important as you move forward in time and add higher-bandwidth signals to the switch. By doing the switch completely photonically, we are independent of any bit-rate advances, any multiplexing of wavelength, etc. We can take anything that comes in on a fiber and switch it to another fiber without regard for any of those things."

Xros expects to begin customer trials with the X-1000 late this summer, with shipments beginning next year. Lucent expects to have a product to market in September.