The Lutz effect!
Newbridge launches overhaul
New president gets set for battle in the U.S.
By JILL VARDY
Technology Reporter The Financial Post
OTTAWA -- Newbridge Networks Corp.'s employees got their first glimpse yesterday of the new
president's goals for the company.
Alan Lutz's plans for Newbridge have already impressed U.S.-based Furman Selz Inc., the most
recent brokerage house to raise its recommendation on the software maker to a "buy" from a "hold."
That helped send the stock (NNC/TSE) up $2.20 yesterday to $34.90.
The upgrade came as the first groups of employees were shown a draft of the company's new
mission statement, which Lutz said reflects his aim to make Newbridge "a company that can remove
the barriers to effective business communication."
The first step is an overhaul of its marketing and communications
structure.
Moving swiftly since joining the firm June 2, Lutz has already
briefed analysts on the overhaul, which he hopes to complete by
the end of July.
The goal is to gird Newbridge for battle against the "hype engines
from California" -- Cisco Systems Corp. and Ascend
Communications Corp., its biggest competitive threats.
"This is about defining the market segments in which to do battle,
strongly communicating your intentions in those segments, and
doing everything possible to keep the invading army off the
beach," he said.
Lutz said Newbridge must aggressively home in on sales opportunities outside its traditional market
of big phone companies. New customers must include large companies, Internet service providers
and other carriers.
"Our focus on primary carriers has been so tight that we've allowed people to emerge in the
alternate carrier space.... We intend to fix that rather rapidly," he said.
That will require better co-ordination between the groups that produce and sell each product, and
moves to raise its profile in the U.S. Newbridge's biggest risk now is the "speed of execution" of its
new plan.
The promised overhaul has done little to restore the confidence of some analysts, who see
Newbridge's future earnings tied too closely to the sales performance of its flagship asynchronous
transfer mode line of products, which carry multimedia signals at high speeds. Robert MacLellan,
technology analyst at Kearns Capital Ltd., said Newbridge's bottom line is hypersensitive to the
slightest shock in this market.
"A restructuring implies they are seeing problems in the U.S. market, which is the early adopter
market for ATM technology," he said. That's why he's recommending clients reduce their holdings in
Newbridge, despite predicting a 50% jump in its ATM sales this year.
Some observers have marveled at the speed with which Lutz has moved since his appointment
three weeks ago. They suggest the overhaul plans may have been put in motion by the board of
directors before he was recruited.
But one analyst said Lutz's entry gives the company a tough cop who can push through crucial
cost-cutting measures, even if they're not his own.
Lutz said Newbridge is too small a telecommunications equipment supplier to be all things to all
customers, so it has to picks its fights wisely, especially since chairman and chief executive Terry
Matthews intends to keep it independent.
"We have no plans to sell the firm. I'm aware of nobody that wants to buy it," he said. "I didn't
come here to pretty it up so that we could. I'm here to grow it into a Fortune 500 company."
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