Nortel (NYSE:NT) was back on the headlines today spending money to the tune of $448 million (in cash) to snatch up IT services firm PEC Solutions (the deal is expected to close later in June).  PEC is a player in the government IT Services industry, which is being pegged at an estimated $60-65 billion in 2005, and growing at annual rate of about 4%.  The idea is to merge PEC with Nortel's Federal Network Solutions unit and to create a new business unit (a US-based wholly owned subsidiary called Nortel PEC Solutions) - thereby avoiding any restrictions a Canadian company might have in competing for US government contracts.

The reaction thus far has been mixed, with some naysayers pointing the fact that this was an expensive cash transaction in an industry that is growing at a relatively modest rate.  But the flip side of that argument is that the transaction opens the door to a very profitable LOB for Nortel (13-15% margins are typical) in a market where the company was not previously able to firmly establish itself.  Plus, of course, it is a way to get CEO Bill Owens to leverage his military connections to help boost the company's chances of securing US government contracts. 

This is just one of many moves Nortel will be making this year - there should be more M&A activity, as well as some consolidation. 

After posting a journalist's negative view on the viability of blogging as a business tool, surely enough I would not miss an opportunity such as this one to post about the other side of the coin (i.e. the glass is half full rather than half empty).  Business Week had blogging in its cover page (see photo to the left) with a great insight into how blogs will impact the business world.  Even the article itself was written in the form of a blog - so kudos to them for being so creative.  Business Week also took advantage of the cover and the feature article to introduce its new Business Week blog (called Blogspotting).  Blogspotting's first entry was posted on April 21st.