Nortel Acquires DiamondWare to Improve Virtual Web and Voice Communications

OTTAWA – Today Nortel* [NYSE/TSX: NT] announced it has acquired DiamondWare**, a pioneer in high-definition, proximity-based 3D positional voice technology that brings life-like sound to virtual web and voice communications. The acquisition furthers Nortel’s drive to transform communications to allow people to collaborate in more interactive and immersive ways.

“A key goal of Nortel has always been to use technology to replicate the richness of a real-world communications experience,” said John Roese, Nortel’s chief technology officer. “The acquisition of DiamondWare strengthens Nortel’s position in the converging telecommunications and IT landscapes and gives us another building block to create the ultimate communications experience for our customers.”

DiamondWare’s technology has been deployed in gaming environments and in U.S. military tactical intercom systems, and by a broad range of carriers and equipment manufacturers. DiamondWare’s technology uses wideband, stereo capability and custom spatial positioning that can deliver real-time interactions in 3D virtual worlds and meetings, online gaming systems, and multimedia applications.

For example, if several individuals in a virtual game or meeting are speaking at the same time, DiamondWare’s technology allows each individual to hear other participants in relation to how far away they are in the virtual space. Participants can also engage in private conversations. These types of capabilities can dramatically enhance the virtual communications experience and make it much closer to a real-world experience.

“DiamondWare’s 3D voice technology will help give Nortel’s customers a more natural and immersive communication experience, whether they’re using it for traditional telephony and conferencing applications, mobile unified communications or for Web 2.0 virtual world environments,” said Keith Weiner, CEO of DiamondWare.

“Having had first-hand exposure to both DiamondWare and web.alive, Nortel’s Web 2.0 virtual conferencing platform, the natural synergies are clear,” said Jon Arnold, principal of J Arnold & Associates** and a widely-followed blogger. “These are complex technologies that DiamondWare has been quietly mastering, and will help Nortel establish market leadership in what I see being the next wave of interactive communications.”

Nortel will leverage DiamondWare’s technology across its Carrier and Enterprise portfolios to enhance its multimedia, voice conferencing and VoIP solutions. In addition, it will be used for a variety of new advanced research projects that are part of Nortel’s Incubation Program. One of these projects, dubbed “web.alive”, is a 3D Web networking solution that allows users to collaborate, socialize and conduct business in a virtual environment with life-like visual and audio features, within the security of their own corporate networks.

Under the terms of the agreement, Nortel will acquire all of the outstanding shares of DiamondWare. The acquisition costs, including employee retention and transaction costs, were approximately $7M in cash, plus up to an additional $3M to DiamondWare security holders based on achievement of future business milestones over the next 40 months.