Newbridge coffers prepared for acquisitions
Chairman says company has expanded its market potential
by moving into Internet, broadband multiservice markets
SHAWN McCARTHY
The Globe and Mail
Friday, September 24, 1999
Ottawa -- Newbridge Networks Corp. is sitting on a warchest of $880-million as it looks for more acquisitions to consolidate its position in booming Internet
and broadband services markets.
Newbridge chairman Terry Matthews said the company has changed dramatically in the past few years, and has greatly expanded its market potential by
moving aggressively into solutions for Internet providers and broadband multiservice sales.
"Our target market has dramatically changed and you can expect to see from the company a much better performance," Mr. Matthews told shareholders at the
company's annual meeting.
He said Newbridge's target market is 10 times what it was just three years ago.
The company also said yesterday it had moved a step closer to clinching a key acquisition of Stanford Telecommunications Inc., and announced three major
contracts worth more than $400-million (U.S.) over the next several years.
Senior executives promised more acquisitions in the near future, but refused to discuss specific targets.
Mr. Matthews and Newbridge chief executive officer Alan Lutz assured shareholders that the delivery problems that plagued the company last year are now
behind it. Mr. Lutz said the company was unable to complete $115-million (Canadian) worth of sales because of delivery backlogs in the final quarter of fiscal
1999; that figure dropped to $10-million in the first quarter of this year.
Mr. Matthews said the company encountered some problems over the past year because it was undergoing a major overhaul of its product lines and corporate
offices.
Newbridge has deliberately moved away from a reliance on time division multiplexer (TDM) switching technology -- which is a mature market -- and into the
broadband multiservices.
The company saw its revenue from broadband multiservices technology grow 43 per cent last year and analysts are expecting Newbridge's revenue from that
product area to increase 50 per cent this year.
The company announced yesterday it concluded a memorandum of understanding with Toshiba Corp. for the distribution of Newbridge's local multipoint
distribution services (LMDS) network equipment in Japan.
The deal would be worth at least $350-million (U.S.) over the next five years and includes co-operation in joint product development and manufacturing.
The technology allows service providers to deliver data, Internet, voice, video and multimedia services from a single platform to residential and business
customers.
The company also announced that Movicom, an Argentine BellSouth affiliate serving more than a million mobile-phone customers in the Buenos Aires area, will
use Newbridge equipment to create a national broadband network. The value of this agreement to Transistemas, a Newbridge subsidiary in Argentina, is
estimated at about $50-million.
Mr. Lutz said BellSouth has subsidiaries and affiliates throughout Latin America. "We see this as the first tranche of several in the future," he said.
Newbridge also moved a step closer to closing one key acquisition, the $490-million (U.S.) purchase of Sunnyvale, Calif.-based Stanford Telecommunications,
which produces broadband wireless technology that complements Newbridge's own offerings.
Yesterday, the two firms announced the sale of Stanford's defence communications business to ITT Industries. Mr. Lutz said he expected that deal to be
completed by the end of November.
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