12/10/99 Ottawa Sun 69
1999 WL 29177313
The Ottawa Sun
(c) Copyright 1999 The Ottawa Sun. All Rights Reserved.
Friday, December 10, 1999 (See Bold)
Money
PRODUCT PLACEMENT FOR BUYER? NEWBRIDGE NEWS HEIGHTENS TALK OF KANATA COMPANY'S
RUMOURED SALE
BY KEVIN BELL, MONEY EDITOR, OTTAWA SUN
A key product shipment for Newbridge Networks Corp. will likely
silence skeptics who say its impending sale is just a ruse, analysts
said yesterday.
Newbridge plans to announce next week it has met a key deadline for
shipping its high-capacity 50-gigabit switch for customer testing,
meeting the company's end-of-month deadline and surprising some analysts
who expected a delay.
The product, which will be the most powerful ATM (asynchronous
transfer mode) switch on the market, brings the Kanata company's sale
closer to reality, said Rob MacLellan, an analyst with CT Securities.
"It does make it more attractive as a takeover candidate," he said.
But "there's still a lot of skeptics out there."
News of the shipment of the powerful switch will likely increase
Newbridge's stock price, but potential buyers will be more eager to take
over a company with cutting-edge technology, he said.
ANALYSTS SKEPTICAL
The switch could also stem some of the leakage of Newbridge's ATM
market share to Lucent Technologies, adding about $10 million in
revenues in the current quarter.
Some analysts, however, are skeptical that Newbridge is serious about
seeking a buyer. They theorize that the Nov. 18 announcement of a
possible sale is a strategy to prop up the share price, making it less
inviting as a hostile takeover target.
Meanwhile, management will begin to see revenues increase next year
from the 50- and new 450-gigabit switches, allowing them to continue as
a stand-alone company, they say.
But analysts said the hiring of investment banker Morgan Stanley Dean
Witter & Co. to shop for buyers is a sign that Newbridge is serious.
"Morgan Stanley is not in the habit of doing work for free," said
Duncan Stewart, a partner with Tera Capital Corp. "I firmly believe it
will be sold by Christmas."
It's rumoured that Morgan Stanley will not be paid unless a sale is
consummated, which increases its incentive to find a buyer.
MacLellan also said a bid could arrive by the end of the year. "It
looks, feels and smells like it's serious," he said.
HIGHER ATTRACTION
But one prominent Toronto analyst, who asked not to be named, said
he's still skeptical a buyer will be found despite field trials of a
new switch.
"The attractiveness of Newbridge was more in the past than it is
today," he said. "I can't see why there would be so much of a rush
today."
Newbridge declined to comment on takeover speculation.
---- INDEX REFERENCES ----
COMPANY (TICKER): Morgan Stanley Dean Witter & Co. (MWD)
NEWS SUBJECT: World Equity Index (WEI)
INDUSTRY: Securities; Computing: Data Transmission; Computer Makers; Computers (SCR IDTS CPM CPR)
EDITION: FINAL
Word Count: 404
12/10/99 OTTAWASUN 69
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