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Thursday November 18 3:18 AM ET
Newbridge Keeps Quiet About Takeover Talk
By Susan Taylor
OTTAWA (Reuters) - Amid growing takeover speculation, troubled Newbridge Networks Corp (NYSE:NN - news). refused to comment on Wednesday after Swedish telecoms equipment maker Ericsson said it is not opposed to making large acquisitions such as a takeover of Newbridge.
Ottawa-area telecoms equipment maker Newbridge has been seen as a takeover target since issuing its sixth earnings warning in 10 quarters on November 2 and announcing the resignation of President Alan Lutz.
Newbridge stock was subsequently battered by investors, but takeover rumors have helped it regain some ground.
Shares made minor gains on Wednesday, adding 60 Canadian cents to C$27.85 on the Toronto Stock Exchange and 1/16 to $18-15/16 on the New York Stock Exchange.
Newbridge has played down speculation that Ericsson and France-based telecoms group Alcatel Alsthom are interested in buying the company.
''If we find an acquisition target which is big, then we will of course present it to Ericsson's board,'' President Kurt Hellstrom told Reuters on Wednesday.
Responding to a question on what constitutes a large acquisition, Hellstrom said: ''If you're talking about Newbridge, then that would be a large acquisition, while ACC was a smaller acquisition.''
Ericsson bought California-based Advanced Computer Communications (ACC) from Newbridge in 1998 for $285 million.
The world's third-largest maker of mobile phones and the biggest producer of mobile systems, Ericsson has until now followed a strategy of buying small- and medium-sized firms.
''Ericsson may simply be leaving the door open and may have somebody else in mind, (and) they may have nobody in mind,'' said Rob MacLellan, an analyst at CT Securities in Toronto. ''I wouldn't read too much into it.''
Newbridge has denied media reports that its board was told it would review takeover bids when it met on Wednesday and Thursday.
Directors are considering an action plan, on which work began in late August, to address sales problems.
That plan will be discussed with 3,300 Ottawa-area staff at the nearby Corel Center hockey arena on Thursday afternoon. Newbridge said it holds staff updates with the release of quarterly results.
''I can categorically state it (the plan) wasn't in response to our perception of a slowdown in ATM revenue,'' Newbridge spokesman John Lawlor told Reuters.
Newbridge, which warned it expects a profit of 8 to 10 cents per share versus analyst expectations of 20 cents per share, releases its results in a conference call late on Thursday.
Slowing sales for the firm's Asynchronous Transfer Mode (ATM) technology, which zips multimedia data around networks at high speeds, was largely to blame.
''You would expect that the results will be pretty well in line with the pre-announcement of November 2,'' Lawlor said. ''Probably less time will be spent on the results and probably more time on the strategic actions.''
Analysts may also want further details on the departure of Brian Jervis, the head of the switching product group. Ed Ogonek, who joined Newbridge in August from Alcatel, has replaced Jervis on an interim basis.
Although analysts are keen to hear details of the repair plan, several suggest the outlook will not be positive.
''My gut feel is that guidance on the 18th is going to entail much more modest ATM growth (and) higher overhead spending because of the recent acquisitions,'' said MacLellan.
''I don't think the street is going to like, a whole lot, what they hear Thursday night. And that is going to translate probably into weakness on Friday -- takeover speculation aside.''
Newbridge said it expects sales to pick up steam with its new high-speed switch, scheduled for release for lab trials in upcoming weeks, and its broadband gear.
''Do we believe that the sales slowdown will correct itself?...yes we do,'' Lawlor told Reuters. ''Every sign indicates that...sales in the U.S. market, as well as elsewhere, but in the U.S. market to begin accelerating again.''
Meanwhile, after a three-week trial on Lucent Technologies Inc (NYSE:LU - news).'s allegations that Newbridge's ATM products infringe five Lucent patents for data networking systems used in Internet communications, a federal jury began deliberations in Delaware on Wednesday.
($1-$1.47 Canadian)
Earlier Stories
Newbridge Quiet on Ericsson's Takeover Comments (November 17)
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