Bob Howarth:Golden Oldies: FORBES: ERICY buying NN
( love the news: 100%of my Canadian RRSP is in NN stock for years !!!!!!)
forbes.com
July 29, 1999
Archives One Week View
Newbridge Networks: Next on the
auction block
By Om Malik
SILICON VALLEY. 02:10 PM EDT¢European
telecommunication equipment companies, feeling
left behind their American counterparts, are opening
their checkbooks and looking to snap up some North
American networking hardware makers. Alcatel of
France acquired Xylan for $2 billion while General
Electric Company of U.K. acquired Fore Systems for
about $4.5 billion.
Now the word is that the latest company to go on
the auction block is Newbridge Networks of Kanata,
Ontario. Sources familiar with the company say that
Newbridge is in talks with Ericsson of Sweden, a
deal that could be announced as soon as Monday.
However, when contacted by Forbes.com,
Newbridge spokesperson Chris Fox said: "We are
not in active negotiations." Fox dismissed the deal
as rumor.
Nevertheless, the teams from two companies are
said to be holed up in Washington, D.C., hammering
out the terms of the agreement. The meetings have
been going on for almost a week now.
The deal is said to net Newbridge shareholders over
$30 a share, making this a $5 billion-plus merger.
Newbridge Networks has 178.6 million shares
outstanding, with Chairman and Chief Executive
Terrence Mathews owning about 25% of the
company. Newbridge did not respond to calls before
press time.
Newbridge started off building analog switches but
now has diversified into digital networking products
for companies like British Telecom and Cable &
Wireless. Newbridge is also formidable in the ATM
(asynchronous transfer mode) equipment business,
and ATM represented more than 60% of Newbridge's
$1.1 billion (U.S.) total revenues in the second half of
fiscal 1998.
In addition, the company has invested in several
startups that are known as Newbridge Affiliates and
will add to the overall appeal of the company. Most
of these startups are involved in developing advanced
networking technologies. Newbridge Affiliates boasts
a stable of 20 companies, with some 1,500
employees. The parent company says the affiliate
companies "have a combined annual revenue greater
than $200 million."
The Newbridge-Ericsson merger would be the latest
in the high profile unions that are sweeping the data
networking business. In 1998, Canadian giant
Northern Telecom (nyse: NT) snapped up Bay
Networks for $9 billion, and then Lucent
Technologies (nyse: LU) scooped up Ascend
Communications (nasdaq: ASND) for almost $20
billion. And there are the scores of small
acquisitions made by the networking giants.
Most of these companies are playing catchup with
Cisco Systems (nasdaq: CSCO), clearly the leader
in the Internet Protocol-based networking equipment.
The demand for the IP-based networking equipment
is growing at a breakneck speed, outpacing the
demand for the voice-related equipment.
European hardware vendors have been slow to wake
up to this market and are also playing catchup.
European vendors such as Alcatel, Siemens,
Ericsson and Nokia wised up to the data-networking
trend too late and are thus snapping up second-tier
data-networking hardware companies. Analysts
believe that the only independent company left after
the possible Ericsson-Newbridge Networks deal will
be Cabletron Systems (nyse: CS) |
