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Alcatel To Buy Internet Firm Xylan

March 2, 1999

PARIS (AP) _ French telecommunications company Alcatel SA is buying the California-based Internet equipment maker Xylan Corp. for about $2 billion in cash in a move that will boost its profile in the United States.

The purchase will allow Alcatel to strengthen its position as an equipment supplier to U.S. telephone companies, using Xylan’s expertise in making switches and routing gear needed for high-speed data networks.

``Alcatel is implementing a comprehensive strategy to become a key worldwide player in the Internet field,″ Alcatel Chairman Serge Tchuruk said today in a statement announcing the deal.

With the volume of data traffic worldwide growing much more rapidly than old-fashioned voice telephone calls, established companies such as Alcatel are increasingly investing in Internet equipment makers.

Alcatel already owns 6.5 percent of Xylan, which was founded in 1993 and is based in Calabasas, Calif. Alcatel bought the stake in Xylan from an investment in 1995.

It has agreed to pay $37 a share for Xylan in a cash tender offer beginning Monday.

The boards of both companies have approved the deal, which is subject to clearance by antitrust regulators.

The deal is expected to be completed in the beginning of April.

Steve Kim, Xylan’s president and chief executive, said his compny ``has grown beyond anyone’s expectations over the last five years″ and the deal with Alcatel will give Xylan a ``dramatic boost.″

Xylan has acquired more than 4,000 customers and annual revenue has risen to $348 million in five years.

Paris-based Alcatel opeates in 130 countries.

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