That lesson about the value speed was foremost in Buechner's mind when he assumed his current post in June 1997. The market rush toward Web-tone technology had begun to take off, far outpacing Nortel's ability to develop internally all of the products that it would need. The market window had closed to a narrow slit. Buechner's challenge: Grab technology before Alcatel, Cisco, Lucent Technologies, and other competitors did. "My objective," he says, "was to be a significant change agent, to see if we could do something to take the blinders off Nortel." As with R&D, the problem with acquisitions involved time: If Nortel could not be first with the products that its customers needed, then it would lose those customers. With that realization in mind, Buechner went on a tear, cutting deal after deal -- one per month during his first 18 months on the job. That string of acquisitions and investments helped Nortel piece together key technologies for providing the Internet-protocol networks that Internet-service providers and global telecom companies all demand.
"The driving motivation for making an acquisition or taking a minority stake in a company is time to market," he says. "If you're not there at the beginning of a market window, if you're not there to leverage the opportunity, your odds of being successful and becoming one of the top players -- and therefore a profitable player in that market -- are next to zero." In other words, Nortel would pay handsomely for speed. Instead of thinking about the time value of money, Buechner was thinking about the money value of time.
When Nortel began to court Aptis in 1998, Buechner had nothing but time on his mind. The technology that Aptis had developed represented a major advance in an industry that had gone through three distinct market stages in rapid-fire order. In the first stage, makers sold their product -- usually a box with 8 ports -- to corporations. In the second stage, makers sold boxes with about 64 ports to Internet-service providers. But the third stage offered makers an immense new opportunity: to sell boxes with ports numbering in the thousands, boxes with the ability to deliver mind-boggling amounts of data and dial tone - like reliability, to ISPs and telecom companies. "The market became a different market," says Buechner.
With that opportunity, though, came a problem: Nortel had a limited time in which to act -- and no product. Yes, Nortel's engineers were working on a product. So were the engineers at Shiva, one of Nortel's strategic partners. But Aptis was far ahead of both companies. Says Buechner: "We had a hole in the dial-access business."
Buechner and his team swung into action and devised a complex deal: Nortel severed relations with Shiva, it acquired an agreement with Shiva not to bar any former employees now working at Aptis from working on competing technologies, and it bought Aptis. When the deal was done, Nortel had access to technology that money wouldn't be able to buy anywhere else for at least six months.
The acquisition, says Buechner, was all about time and people. "We bought a hard-core team of developers in that space," explains Buechner. "As the value shifts to software and applications, more and more of the value of the company lies in its people, and less and less value lies in its assets. People really become the company, because that's where the information is kept. I don't care how well you document software and applications; ultimately, everything is in the minds of the people who developed it."
But how to put a dollar figure on the technology in the minds of the engineers at Aptis? What was their lead time worth? And what was the value of the product's architecture, which enabled the combination of voice and data? Buechner calculated the revenues that were likely to come from the sale of Aptis's product through Nortel's marketing and sales channels. He also ran a discounted-cash-flow analysis. But, like Betsey Nelson, Buechner recognizes the limits of DCF. "It's useless," he says. "Your ability to execute in terms of leveraging your channels, your ability to get the product to market, and your customer relationships are what will determine success."
On the other side of the table, Aptis cofounder and CEO Paul Gustafson, 38, was also struggling to figure out the worth of his company. He came up with two methods. First, he looked at recent comparable initial public offerings on Wall Street. Second, he calculated Aptis's likely future earnings, discounted them, and multiplied them by an old financial standby -- the price-earnings ratio of comparable high-growth public companies.
In fact, Gustafson and Buechner were coming at the value of this asset from the same perspective: time. Like Buechner, Gustafson made the key assumption that the Aptis product would beat competitors' products to market by six months. That would give Aptis -- and Nortel -- a big advantage in selling to telecom customers and a big head start on cash flow.
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