CROSSKEYS WISHES TO LOOSEN TIES TO NEWBRIDGE
New President says software firm is hindered in landing big contracts with parent's rivals.
Simon Tuck
Technology Reporter, Ottawa
Globe & Mail
CrossKeys Systems Corp. is aiming to loosen the apron strings tying it to parent Newbridge Networks Corp., and may even ask Newbridge founder Terrence Matthews to step down as its
chairman.
Ian McLaren, CrossKeys' new president and CEO, said yesterday that his company needs to strike out more on its own to land big contracts with the telecommunications giants that make up
the key market for the networking software maker, that are rivals of Newbridge.
Newbridge founder Mr. Matthews is willing to do whatever is necessary to help Kanata, Ontario based CrossKeys, Mr. McLaren said, including stepping down as chairman or reducing his
stake in the affiliate.
"He's open to both of those conversations," said Mr. McLaren, who meets regularly with Mr. Matthews. "It's not like it's a big stumbling block."
A Newbridge official confirmed that the company supports CrossKeys' move toward more independence.
Mr. McLaren said CrossKeys is already showing signs of increasing its autonomy. In recent weeks, the company has signed a marketing alliance with Nortel networks Corp. of Brampton,
Ontario - a Newbridge competitor in some product lines - and shuffled its board of directors to increase its non - Newbridge presence. Shareholders are to vote on the proposed changes on
September 3rd.
Both moves are signs of the company's new "multivendor strategy" that has been endorsed and also followed by Newbridge, Mr. McLaren said. "That's the way the industry is going."
CrossKey's move casts a shadow over Newbridge's affiliates program, whose premise is that start-up firms with technology related to that of Newbridge will gain from their association with the
larger company.
Newbridge has used its affiliates program, an alternative to acquisitions, as a way to guarantee access to emerging technologies without losing its focus - and quite often amass capital gains.
CrossKeys is not the only affiliate wanting to unshackle itself from Newbridge. Tundra Semiconductor Corp., the only other publicly traded affiliate, has made tentative attempts to distance itself
from its corporate parent.
CrossKeys is the best known of Newbridge's stable of about a dozen affiliates and became the first to go public in 1997. Newbridge, a Kanata Ontario maker of communications equipment,
and Mr. Matthews' investment company together own 44.5% of Crosskeys stock.
In the fiscal year that ended in May, Newbridge accounted for 46 percent of CrossKeys' 43..8 million in revenue.
Analysts have long pointed to CrossKeys' dependence of Newbridge as a potential hazard. "It's very hard to make a living as an independent software vendor if you are seen as Newbridge in
different guise," said Michael Urlocker, a technology analyst as Scotia Capital Markets Inc. in Toronto. "When Newbridge his a bit of turbulence, CrossKeys get bumped along too."
Despite the new strategy Mr. McLaren emphasized that CrossKeys with still have plenty of room for Newbridge as a customer and an investor.
Analysts also point out that claiming a spot on Newbridge's roster of affiliates also has benefits. Analysts say it's a great way to get door opened, particularly when a startup company is just
getting off the ground. CrossKeys, given the title last year of Canada's fastest-growing company, relied heavily on Newbridge contacts and partners during its early years.
But it's been battered in recent months by weak market conditions in Asia and Latin America, the demise of key customer West End Systems Corp., and most of all by Siemens AG's decision
earlier this year to develop its own network software instead of buying from CrossKeys. Siemens' move about six months ahead of expectations, shaved as much as $3 million a quarter from
CrossKeys' revenue.
CrossKeys expects to make announcements about new contracts and sales channels of the next few weeks, Mr. McLaren added.
The company also expects to hire about 120 people of the next 12 months, primarily in the Ottawa area. The company has about 275 employees. |
