Interview with Flynn in fanancial post:
nationalpost.com
Wednesday, December 15, 1999
Rebuilding credibility job
one as Newbridge tries to
calm rumours
Jill Vardy
Financial Post
OTTAWA -
Newbridge
Networks Corp. is
scrambling to
convince customers
that rumours of its
imminent sale won't
hurt its ability to fill
contracts for its
telecommunications
equipment, the
company's new
president said
yesterday.
"Does all this speculation drive me crazy? Absolutely," said Pearse
Flynn, Newbridge's president and chief operating officer. "It gets
our customers thinking and our employees thinking, and our
competitors are trying to take advantage on both fronts."
Newbridge closed its purchase of Stanford Telecommunications
Inc. yesterday. It has been winning small contracts for its equipment
and is restructuring to try and ensure its survival as an independent
company, Mr. Flynn said.
"We have a go-it-alone plan and that's the way we're going," Mr.
Flynn said. "I can't comment on any speculation because I have
nothing to comment on."
Most analysts expect and hope Newbridge will be sold, despite
Mr. Flynn's efforts to ensure its independent survival. "He's clearly
been brought in with a role to play -- to rally the troops and find a
way to have this work as an independent company. But it's very
difficult," said one financial analysts who has covered Newbridge
for three years.
The analyst, who asked not to be named, gives the company less
than a 50% chance of surviving as an independent company. "It
doesn't sound logical to me that Newbridge would have hired
Morgan Stanley on a whim," the analyst said. Newbridge has hired
the U.S. financial house to evaluate any takeover bids and negotiate
with potential buyers. It said on Nov. 18 that it is open to all
possible options for its future, including bids from larger
telecommunications equipment suppliers. Since then, the stock has
whipsawed on speculation it would soon be sold.
"I'd be telling lies if I said our competitors weren't trying to exploit
the fact that our name is in the press every other day with wild
speculation. We're having to do a lot of work with our customers to
reassure them," added Mr. Flynn, who took the helm after Alan
Lutz suddenly resigned on Nov. 2. The company reported
second-quarter earnings that were less than half what analysts had
expected.
The company is working quickly to get its new telecommunications
switches out the door and beef up its new business in the local
multipoint distribution system (LMDS) market, a new wireless
technology.
Mr. Flynn said Newbridge is winning half the LMDS contracts on
which it bids. The purchase of Stanford Telecom will help cement
that leadership position.
"The technology we get from that deal will give us a real lead in the
broadband wireless LMDS market," he said. Newbridge's
revenues from LMDS will be 40% to 50% above the $100-million
(US) the company had projected for this fiscal year, he added.
But Newbridge's more immediate problem is to recapture market
share in the United States for its flagship asynchronous transfer
mode (ATM) equipment, which makes up the vast bulk of its
revenues. A report by International Data Corp., to be released
tomorrow, shows Newbridge is the market leader in ATM in the
Asia-Pacific region, capturing 37% of total sales in that region.
But Asia-Pacific only represents about 18% of Newbridge's ATM
sales.
Newbridge announced Monday it is initiating field trials for its
next-generation switch with British Telecom PLC and SBC in the
United States. U.S. research firm Ryan Hankin and Kent (RHK)
estimates that the market for core switches like Newbridge's should
reach $8-16 billion (US) in 2003. |
