British firm to acquire Fore

Britain's General Electric Co. has announced plans to buy Fore Systems Inc., a company that supplies network switching equipment to several federal organizations, large corporations and Internet service providers.

GEC said last week it would pay $4.5 billion in cash for Fore Systems, a price that represents a 43 percent premium over Fore Systems' closing stock price April 23.

Fore Systems, Pittsburgh, is a leader in Asynchronous Transfer Mode technology, which is used to transfer voice, data and video over a single network. Its products, including ATM and Ethernet switches, adapter cards, multiplexing products and internetworking software, are used in the backbones of some of the largest enterprises and Internet service providers, according to the company.

Fore Systems' federal customers include the departments of Defense, Energy and Justice, NASA's John H. Glenn Research Center at Lewis Field, the National Weather Service, Voice of America, the Naval Research Laboratory, Sandia National Laboratories and the World Health Organization. It remains unclear whether the deal would cause Fore Systems to pay less attention to its key enterprise accounts, said Eddie Hold, senior analyst for enterprise infrastructure at Current Analysis Inc., Sterling, Va. He said that most of the future ATM business is expected to be with carriers, as opposed to enterprises, and he suspects Fore Systems will wean itself away from the enterprise space.

A Fore Systems official did not return calls seeking comment on the acquisition.

Fore Systems had been on the market for a long time, and there had been a lot of speculation about who would buy it, Hold said.

A U.S. subsidiary of GEC, Acquisition Corp., will purchase Fore Systems, which will keep its name and operate as a wholly owned subsidiary of GEC.

Byron Brooks, vice president of Sphere Communications Inc., said he believes the deal with GEC will have little effect on Fore Systems' federal operation. Fore Systems' federal division resells Sphere's products to federal agencies.

"The federal systems group does very well, and I expect GEC will want to continue that," Brooks said. "And since Fore deals a lot with DOD, I think [the federal group] would have a high degree of autonomy because GEC is British-owned."

George Simpson, GEC's chief executive officer, said in a statement that the acquisition will enable GEC to enhance its Marconi Communications call center, which will be integrated with Fore Systems' ATM and Internet Protocol switching.

Marconi Communications is a subsidiary of GEC and a major supplier of transmission and access products to outside-U.S. carriers. But Hold said Marconi is not aimed at serving enterprises.

GEC's statement said the combined company will be able to bring a broader range of products and technology with greater strength and scale to address enterprise businesses worldwide. The acquisition also gives GEC access to new customers and extends its product portfolio into the ATM and IP switching sector.

Fore Systems reported annual revenue of $632 million in the fiscal year ended March 31. The company employs about 2,000, including 1,450 in the United States.

GEC is Britain's biggest electrical engineering company and is not related to the Fairfield, Conn.-based industrial giant General Electric Co. The Fore Systems acquisition is GEC's second major buy since January, when it agreed to sell its defense electronics business to British Aerospace PLC. On April 9, GEC acquired Reltec Corp., a U.S.-based telecommunications products business, for $1.74 billion.

-- Brad Bass contributed to this article.


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