Nortel spurned as Bay holds on for Mr Right

Bay Networks is understood to have turned down a takeover offer from telecoms equipment vendor Nortel but it is still open to other sale offers.

According to US reports, the networking company rejected Nortel's offer of $27 a share. This has led to speculation that Ericsson is putting together a higher bid for the company.

Reports last week indicated that Lucent Technologies, the US telecoms equipment giant, had previously courted Bay to help achieve its own data ambitions, although no deal has been signed.

Bay Networks, which is believed to have been up for sale since Dave House became chief executive in late 1996, had wanted $35 a share. But House is believed to have told analysts last week that the company would be open to higher offers.

One analyst, who was present at the meeting, said: 'If an acquisition offer for fair value for the company came over the table, they would consider it strongly, which is essentially saying that the company would be for sale at the right price.'

An acquisition by Nortel would have made sense, given the telecoms equipment vendor's IP and data ambitions.

Nortel admitted that it wanted to make a 'right-hand turn' in data networks from its traditional voice market. The company is currently pushing Webtone, an initiative aimed at making the internet as ubiquitous and reliable as the telephone.

To bolster its data offerings, Nortel has been on a buying spree, most recently bagging Avici, a router developer, and Aptis, a remote access company.

Representatives from both Nortel and Bay Networks refused to comment on the speculation.