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Technology Stocks : Newbridge Networks

NN 12.69

+3.7%

1:52 PM EST

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To: thebeach who wrote (14598)	11/16/1999 12:32:00 AM
From: Doug	Read Replies (1) of 18016

thebeach : Well you have it right. Canadians have shown they dislike Bank mergers, Airline Mergers and Telecom mergers. Unfortunately for NN investors, the only Companies (LU & CSCO) with cash are not interested in NN. The other Companies who may be intersted can only offer a share swap. NN and its Board know that a share swap means that the actual cash realised will be near 70% of the swap price. They would prefer a cash deal but no one has the type of cash or the willingness to take on more debt. Hence the Board and T.M must fall back on an alternate strategy. They are likley going to reduce expenses by expensing out R&D thru 3-5 year partnership agreements in return for which they will grant preferred Customer status. This means that ALA, ERICY and any one else willing to participate in R&D funding ($50m/yr) get their products at a slight discount to the general market. By expensing out R&D, earnings can grow and there is an incentive for the Partners to utilize NN's products and come up with lower Bids. There are a number of other ways for NN to strengthen its balance sheet but they all involve closer Partnership agreements with a Big Daddy. All the best.!

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