GEC moves to Fore of network market

British firm General Electric Company (GEC) has extended its hold on the data networking market with the purchase of ATM and IP switching company Fore Systems for dollars 4.5 billion.

Fore Systems will operate as a wholly owned subsidiary of GEC, alongside the recently purchased Reltec and GEC's Marconi Communications.

GEC, which produces a wide variety of electronic equipment, has stated its wish to establish itself in the voice and data carrier market and the acquisition of Fore will help it expand into the more lucrative US market.

The acquisition of Fore sees the completion of GEC's turnaround from a former defence business into an information technology group. GEC will pay 43 per cent above Fore's closing price on 23 April, valuing the transaction at about dollars 4.5 billion.

George Simpson, chief executive of GEC, said: 'The purchase of Fore Systems provides us with access to more markets and customers and extends our product portfolio into the increasingly important ATM and IP switching sector. This is also a big boost to Marconi Communications' already significant technology base.'

The purchase of Fore sees the number of big-name independent networking companies continue to dwindle, with Cabletron and Newbridge tipped to be the next to fall victim to this trend.

Shares in Fore Systems traded at dollars 33.50 - up dollars 9 - following the announcement, while the share price of GEC rose by 29.5p to 608.5p.

GEC expects that the acquisition will have minimal effect on earnings per share before goodwill for the coming year. The finance for the buyout comes from cash resources and the group's bank facilities.

The acquisition is the biggest since Simpson decided to refocus GEC as a software developer instead of a hardware-based telecoms business.

The deal is GEC's second since it announced the sale of its Marconi defence arm to British Aerospace.