Rumours roll over Newbridge buyer
By KEVIN BELL, Money Editor
Ottawa Sun
Newbridge Networks Corp. may have gone out of its way to quash
speculation it could soon be up for sale, but observers say a buyer
may be what's needed to spark the company.
While jitters over a possible profit warning in its second quarter have
pushed the stock lower in recent weeks, some analysts say
Newbridge investors' ultimate salvation would be to join forces with
a larger firm.
"I think if they do miss this quarter -- and the market is telling us it
will -- I wouldn't be surprised if the company announces they will
seek the services of an investment banker, somebody to shop the
company around and get the best price," said Brendan Caldwell,
vice-president of Caldwell Securities.
"I think in the world of enormous telecommunications companies,
I'm not sure there is a spot for a firm the size of Newbridge in the
long term."
At an analysts' conference last month, company president Alan Lutz
firmly denied any suggestion that Newbridge is interested in a merger
or a sale. But speculation has not died.
Rumours swirled around investment circles this week that
Newbridge will be hard-pressed to meet expected earnings of
19cents US a share.
And that it in turn led some analysts to suggest that a warning, which
would be its sixth in 10 quarters, could send the stock tumbling even
more.
"It could get to $15 or lower, and as it drops we're going to have
more and more people saying that the stock is a takeover candidate,"
said Rob MacLellan of CT Securities.
"The best possible end game is for Newbridge to be acquired," he
said. "The firm would fill a nice niche for a couple of different
players."
Paul Sagawa, an analyst with Bernstein & Co., said Newbridge
should merge with another firm even if it meets current forecasts.
"Newbridge suffers from massive credibility problems," Sagawa
said.
"Unfortunately, it's going to take chalking up quarter after quarter of
strong results ... There is very little enthusiasm about the stock in the
U.S." |
