Here are some comments about Newbridge's ineternet announcement from last week(Please, don't blame me, blame Reuters):
Monday August 30, 4:10 pm Eastern Time
Newbridge Internet plan fails to ignite enthusiasm
By Susan Taylor
OTTAWA, Aug 30 (Reuters) - - Newbridge Networks Corp. (Toronto:NNC.TO -
news)(NYSE:NN - news) finally drew back the curtain on its Internet strategy last week, but the
analyst audience greeted the long-awaited news with faint applause.
The Ottawa-area based networking company said that it will spend C$350 million over the next
two years to buy the two-thirds stake it doesn't now own in affiliates TimeStep Corp. and Northchurch Communications Inc.
The purchases position Newbridge to tap into the Internet equipment market, which is growing at a blistering pace.
But analysts were left wondering if the plan was too little, too late. They said the company needed to make a bolder move to
effectively compete in a sector dominated by high-tech titans that already have extensive product lines.
``I am not overwhelmed by what they have announced to date. I am underwhelmed,' said Andy Schopick, analyst at Nutmeg
Securities Ltd. in Connecticut.
``If anything, this is a disappointment that this is as far as they were prepared to go at this time. One gets the impression that
Newbridge is no longer leading the market, but following the market.'
Until now, Newbridge had wagered that its asynchronous transfer mode (ATM) technology, which sends multimedia signals
over telecommunications lines at high speeds, would win the market over.
But explosive growth in the Internet protocol market, signaled by the rising fortunes of IP heavyweights such as Cisco
Systems Inc. (CASCO - news) and Lucent Technologies Inc. (OTC BB:LUNA.OB - news), couldn't be ignored.
``There's a whole wave of networking and products where Newbridge is now playing catch up,' Schopick said.
"Newbridge is struggling and they have, in certain respects, lost competitive positioning. They've become less of a growth
story in what is, in a general sense, still a market ripe with opportunity.
Newbridge, which acknowledged last year it wanted to move into the IP market, hinted recently that it planned to announce
acquisitions although analysts were unimpressed with the first deals the company revealed.
``It's a little bit like going to the prom with your cousin,' said Patrick Houghton, analyst at Sutro & Co. in San Francisco of
the purchase plan.
``These were already affiliates to the company, so it's not like they didn't have access to the technology already,' he said.
Analysts agree that Newbridge got good bargains with its purchases.
Recent acquisitions of firms developing similar technology to Northchurch include the April sale of Shasta Networks Inc. to
Nortel Networks Corp. (Toronto:NT.TO - news) for up to $340 million.
``It seems on paper like an intelligent move,' said one analyst who asked not to be named.
Another analyst, who also declined to be named, said both TimeStep and Northchurch have strong technologies that will
benefit from a connection to Newbridge's extensive customer base.
``The deal is good for all parties,' the analyst said. ``One could say they've got a bargain.'
Price tags aside, the jury is still out on the wisdom of Newbridge's strategy.
The markets showed little reaction to the news. The stock closed at C$43.30 on the Toronto Stock Exchange before the
announcement on Wednesday, only to droop down to C$41.35 the following day and to C$41.10 on Friday, a decline of 25
Canadian cents.
Newbridge said it will enter a niche market, selling Internet security and routing technology to carriers that can use the tools
to deliver IP services that generate revenue.
``In the grand scheme of things, Newbridge doesn't really make the radar screen with their IP stuff,' said Paul Sagawa,
analyst at Sanford C. Bernstein & Co. ``It's just very hard to move from being a small company to a big company.'
Other analysts argue the plan holds huge promise.
``From a technology point of view, it's a really big step,' said a Bay Street analyst who asked not to be named. ``The problem
is there's no revenue coming in now, so it's a bit of a question mark.'
The wait now begins for a second IP announcement expected from Newbridge before the end of September. It may come at
the company's annual general meeting on September 23.
To earn market approval, analysts say, a more dramatic scheme is needed with a purchase outside the Newbridge affiliate
family of firms. A company with hot technology or customer wins could be the answer.
``This is a company that can play with the big boys, as far as I'm concerned. They certainly have the wherewithal to go and
attack spaces that they identify as strategic,' said Schopick.
``I have no doubt about their ability to hang in there and be a credible player if they use their resources properly and execute
to a chosen plan. Those are two big ifs.'
($1=$1.49 Canadian)
More Quotes
and News:
CASCO - news
Luna Industries Inc (OTC BB:LUNA.OB - news)
Newbridge Networks Corp (NYSE:NN - news; Toronto:NNC.TO - news)
Nortel Networks Corp (Toronto:NT.TO - news)
Related News Categories: Canadian Market News |
