June 18 (Bloomberg) -- Nortel Networks Corp. Chief Executive Officer William Owens talked this week with Cisco Systems Inc. CEO John Chambers, who has said he wants to partner with Nortel.

Owens met ``with a number of customers, suppliers and other industry participants including Cisco's John Chambers'' at the Canadian Telecom Summit in Toronto, Nortel spokeswoman Tina Warren wrote in an e-mail.

A partnership with Cisco might help Nortel push into the market for Internet Protocol, or IP, telephone equipment, according to Stephen Kamman, an analyst at CIBC World Markets. Nortel shares surged yesterday on comments by Chambers' that he'd be interested in teaming up.

``Cisco is looking for partners in the carrier space,'' said Kamman, who has a ``sector outperform'' rating on Nortel and a ``sector perform'' rating on Cisco and doesn't own either stock. ``Nortel may be taking a fresh look at their strategy across the board.''

Warren declined to give details of what the two men discussed. Terry Anderson, a Cisco spokeswoman, said the company's policy is not to comment on private meetings.

Internet telephony compresses voice and data traffic into IP packets that are sent together over high-speed lines.

Shares Rise

Shares of Brampton, Ontario-based Nortel rose 4 cents to $4.44 at 4 p.m. in New York Stock Exchange trading. The shares advanced 7.6 percent yesterday after the chief executives' comments at the Toronto conference. Cisco rose 6 cents to $23.42 in Nasdaq Stock Market composite trading.

Chambers, speaking in Toronto yesterday, said the world's largest maker of computer-networking equipment wants to partner with Nortel, North America's biggest maker of telephone equipment. Owens said yesterday he was open to ``strong partnerships.''

Owens took the helm in April after the company fired Frank Dunn as CEO and said it would have to restate earnings a second time.

When asked yesterday why San Jose, California-based Cisco hadn't moved to purchase Brampton, Ontario-based Nortel, Chambers said he doesn't know how to do large acquisitions.

Mark Sue, an analyst at RBC Capital Markets, wrote in a report today that the CEOs have begun a dialogue and a partnership between the companies might make sense. Nortel could give Cisco access to its base of phone carriers in North America and abroad. Cisco generates about 70 percent of its sales with businesses, and the rest with service providers.

To contact the reporter on this story: Catherine McLean in Toronto mclean@bloomberg.net

Last Updated: June 18, 2004 16:23 EDT