Ericsson still open to making Newbridge bid
Swedish firm says circumstances must be right to
break its 'string-of-pearls' strategy
James Bagnall
The Ottawa Citizen
Swedish telecommunications equipment giant LM Ericsson yesterday left the
door open to making a possible bid for control of Kanata-based Newbridge
Networks Corp.
No discussions are taking place now, said Gary Pinkham, Ericsson's
vice-president of investor relations. But the situation could change "if a customer
situation dictated that we had to have this technology in-house."
Mr. Pinkham was referring to the asynchronous transfer mode (ATM)
technology that underpins Newbridge's most important product line, the 36170
multi-services switching platform. While Ericsson and Newbridge both make
ATM products for large telecommunications carriers, these are designed to be
used in different parts of the network and are considered complementary.
At the same, however, Ericsson is trying to develop a second ATM product line
that competes directly against that of Newbridge.
"It's only a matter of time before we develop our own set of products with
similar capabilities," Mr. Pinkham said. The issue is whether Ericsson has enough
time before potential customers start looking elsewhere for their ATM
technology. If the Swedes conclude they do not, then a bid for part of
Newbridge could make sense.
Ericsson apparently isn't interested in Newbridge's other two main businesses,
which include an older unit expert in time-division multiplexing technology and a
new unit built around high-speed wireless networks.
Ericsson, a world power in wireless technology, considers itself more than
competitive in both these areas.
Ericsson is one of a handful of global players considered a logical suitor for some
or all of Newbridge's assets.
Newbridge revealed last week that it would consider "all strategic options"
including the sale of the firm. Chairman Terence Matthews cited four possible
suitors during an address to employees last week. This list, not considered by
analysts to be exhaustive, included Ericsson, Nortel Networks Corp., Alcatel
Alsthom S.A. and Cisco Systems Inc. Other potential bidders are a pair of firms
based in the Chicago area, Tellabs Inc. and Motorola Inc.
Ericsson has been following what it calls a "string-of-pearls strategy" in which it
acquires small- to medium-sized data communications specialists. Last year, for
instance, it paid $171 million U.S. for Newbridge's 60-per- cent stake in
Advanced Communications Corp., a California-based data networking company.
Mr. Matthews was so effusive at the time about the good working relationship
between Newbridge and Ericsson that many began looking for evidence that
something bigger was in the works.
Newbridge, with its current market value of roughly $5.8 billion, is clearly too
big to fit Ericsson's string-of-pearls strategy. But by laying out the circumstances
that would change this posture, Ericsson has clearly kept itself in play. |
