Newbridge stock slides on takeover skepticism
biz.yahoo.com
Monday November 15, 7:10 pm Eastern Time
Newbridge stock slides on takeover skepticism
By Susan Taylor
OTTAWA, Nov 15 (Reuters) - Shares in telecoms network equipment maker Newbridge Networks Corp. (Toronto:NNC.TO - news)(NYSE:NN -
news) retreated on Monday from recent gains made on takeover speculation as uncertainty mounted over the firm's willingness to be sold.
Shares in the Ottawa-area firm dropped C$1.90 on the Toronto Stock Exchange to end the session at C$29.50, a decline of 6 percent. In New York,
they ended down 1-1/8 at 20-1/8.
Newbridge stock had been clawing back from a close of C$21.15 on November 3, a day after after the company issued its sixth earnings warning in 10 quarters and announced the
resignation of its president.
Takeover speculation in Canada's national newspapers was behind much of the recent rise. Firms including French telecommunications equipment group Alcatel Alsthom and Swedish
telecoms group Ericsson have been reported to be preparing bids for Newbridge.
``It is all based upon whether people think there's likely to be an acquisition or not,' said Paul Sagawa, analyst at Sanford Bernstein & Co. in New York.
Market rumors that pointed to Alcatel and Ericsson as buyers lost steam on Friday, when Newbridge spokesman John Lawlor was reported as saying the company is not in takeover
discussions with either of those firms.
``There was speculation of a takeover on Thursday and Friday. That hasn't come to fruition and so anyone that traded the stock on the basis of takeovers has not seen that announced.
So they're probably thinking about trading out of it,' said Michael Weinstein, data networking analyst at Credit Suisse First Boston in San Francisco.
``Most people are going to view this company as being in the mode of a potential takeover target and as a result, from time to time you're going to get spikes up in the stock price based
on speculation.'
Analysts said Newbridge makes an attractive takeover candidate, however questions remain about the willingness of founder and Chief Executive Terry Matthews to sell his company.
``Stocks like this, they run up on takeover speculation. It's had a very good run since November 3 -- a remarkable run,' said Rob MacLellan, analyst at CT Securities in Toronto. ``The
media's obviously been talking about it. What the professionals look for is, is there meat behind the rumors?'
Despite the questions about Newbridge's position on a takeover, some analysts suggest the company has a small window of opportunity to remain an attractive candidate.
``If Newbridge is not acquired in the next six months, then I fundamentally seriously question their ability to go it alone,' MacLellan said.
Newbridge management has suggested it believes it is losing market share to network gear firm Lucent Technologies Inc. (NYSE:LU - news) for its flagship asynchronous transfer mode
technology, which sends multimedia data traveling on networks at high speeds.
MacLellan said Newbridge may face a further sales slowdown until its new high-speed 50 gigabit switch is released. Testing may be delayed by one month to late December, which could
defer sales late April, he added.
``Newbridge hasn't been able to get its next generation of its first home run out of the park,' MacLellan said. ``A month delay is not that big a deal -- it's not that unusual. But right now it
means a month less revenue for a company that desperately needs it.'
Analysts hope that Matthews will address the takeover issue in a November 18 conference call after the company announces its second-quarter results. The call follows two days of
board meetings scheduled for Tuesday and Wednesday.
``If he's not going to sell the company, how is it then that they're going to be able to be competitive with Lucent, Nortel, Cisco? Each of which is bringing a considerably more complete
solution to the marketplace,' Sagawa said.
($1=$1.46 Canadian) |
