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CEO says layoffs will make Newbridge stronger
Planned cuts will reduce costs and make company
a more lucrative acquisition target
SIMON TUCK
Technology Reporter
Thursday, November 25, 1999
Ottawa -- Layoffs announced yesterday at Newbridge Networks Corp. will make the company more attractive to potential buyers, said its new president and chief executive officer.
Pearse Flynn said the layoff of 300 employees will help the company meet its goal of reducing costs to about 36 per cent of revenue -- from 46 per cent -- and put its expenditures more in line with its key competitors.
Mr. Flynn said the pink slips should also help make Newbridge more appealing to bidders. "We're stronger [because of these layoffs]," he told reporters at the company's Kanata, Ont., headquarters. "Today, life begins again for us."
But he wouldn't comment on the possible sale of Newbridge or speculation about which companies are in the market.
Newbridge announced 200 layoffs in Europe on Tuesday and will terminate about the same number of workers within its U.S. operations on Monday. In total, the layoffs will reduce the company's work force by approximately 700 employees, or 10 per cent.
But the embattled company's plan to slash expenses won't end there. Details of an outsourcing deal for Newbridge's services operations is slated to be revealed by tomorrow. Newbridge also hopes to polish off an outsourcing deal for much of its manufacturing operations within 4« months. Newbridge's restructuring will include a sharper focus on its research operations and product line. Three changes have already been made to the company's executive ranks so far this month.
The company's long-term goal is to reverse its slumping sales in the United States, where its flagship product -- a high-speed data switch -- has been losing ground to archrival Lucent Technologies Inc. of Murray Hill, N.J. The U.S. market is the world's most lucrative but also is seen as a harbinger for other markets.
Mr. Flynn also said the cost-cutting moves should make Newbridge, which announced last week that it had put itself on the auction block, a more attractive takeover target. "The objective I have is to increase shareholder value."
Analysts agreed that the cost-cutting move will likely help Newbridge get the price it wants. "It should go a long way toward making them more attractive to a potential buyer," said David Powers, an analyst with Edward Jones in St. Louis.
But Mr. Powers said the problem with a public sale of a technology company is that it makes it much harder for the company to hire new people and keep the ones it already has. "That's one of the pitfalls about becoming more public about a potential deal."
At least five companies have already contacted Newbridge about a takeover bid, sources close to the company say, setting up the prospect of a bidding war. The five potential bidders are: L.M. Ericsson Telephone Co. Inc. of Sweden; Nortel Networks Corp. of Brampton, Ont.; Alcatel SA of Paris; Tellabs Inc. of Lisle, Ill.; and Siemens AG of Munich, Newbridge's most important partner.
Officials from both Alcatel and Ericsson have said publicly this month that their companies aren't interested in buying Newbridge.
At least one Toronto analyst said public comments from both buyers and sellers about a possible takeover should be taken with a great deal of skepticism. "Whenever you have a potential takeover situation, everybody has to lie," the analyst said. "It's very hard to distinguish between the lies and reality."
The decision to consider a sale follows months of speculation that the data communications specialist would not be able to withstand the pressures to combine forces with a larger voice equipment specialist. |
