Nortel anticipates fed business with PEC

Executives for Canadian network equipment maker Nortel expect the acquisition of PEC Solutions to provide a wider door into the federal technology market.

Nortel today announced that its U.S. subsidiary will acquire PEC Solutions, an IT services firm with a number of Homeland Security projects.

Nortel Networks will purchase PEC in a cash tender offer valued at $448 million. The transaction is expected to close in June. Once the deal closes, the combined entity will be called Nortel PEC Solutions and operate a U.S.-based subsidiary of Nortel.

The creation of Nortel PEC Solutions as a U.S. business unit will "eliminate barriers to entry" that the Canadian company has faced and provide "resources with the appropriate security clearances," said Chuck Saffell, president of Federal Network Solutions at Nortel.

PEC provides professional services ranging from enterprise architecture development to systems management. The company has 1,700 employees, 80 percent of which hold government security clearances.

For PEC, the deal lifts the company out of federal integration's middle market, where companies struggle to compete with top-tier service providers.

"Our impediment to growth has been one of size," said David Karlgaard, PEC's chief executive officer. "We want to be one of the top players in this marketplace, but it's hard to get there without the size and strength” that the Nortel deal provides. He said being a part of a larger organization will help the company pursue large opportunities.

The Homeland Security Department works with PEC on about dozen projects, including a $60 million contract to provide program management support services for the United States Visitor and Immigrant Status Indicator Technology program. Karlgaard said the U.S. Customs Service, now part of DHS, was the company's original customer when the company launched in 1985.