Have you told Reuters not to bash Newbridge, the "limping takeover target?"
Tuesday December 14, 6:33 pm Eastern Time
New Newbridge president has tall turnaround task
(All figures in U.S. dollars)
Susan Taylor
OTTAWA, Dec 14 (Reuters) - The new president of troubled Newbridge Networks Corp.
(Toronto:NNC.TO - news)(NYSE:NN - news) faces a daunting task -- refocusing the firm's
network offerings and winning back estranged financial analysts -- while laboring under the glare
of takeover speculation.
Pearse Flynn, a native of Cork County, Ireland, was appointed president of the Ottawa-area firm on November 2, the same
day the company issued its sixth earnings warning in 10 quarters.
From now on Newbridge will ``pick the fights that we can win,' Pearse told Reuters in an interview on Tuesday.
``The criticism I had of Newbridge was we were trying to be all things to everybody,' Flynn said. ``If you pick certain fights,
we can beat the big huge guys -- the 800-pound gorillas called Lucent (Technologies Inc. (NYSE:LU - news)) and Nortel
(Networks Corp. (Toronto:NT.TO - news)(NYSE:NT - news)).'
Newbridge is not presently viewed by the financial markets as a contender but as a limping takeover target -- a belief that
makes Flynn's efforts to restore the firm's health all the more challenging.
Long-simmering speculation over which firm will buy Newbridge hit the boil when the company said last month it had hired
U.S. investment banker Morgan Stanley Dean Witter & Co. to consider all strategic options, including its sale.
``If somebody came in and offered a huge amount of money for the company, it's not Pearse Flynn's decision. I run the
company on a day-to-day basis, my job -- and we have a plan -- is to grow the company,' Flynn said. ``My biggest challenge
is actually external factors.'
Flynn, who successfully trimmed staff while boosting sales in his previous role as Newbridge's vice-president for the
Europe, Middle East, and Africa market, will outline Newbridge's fight plan to employees on Thursday and then discuss the
strategy with financial analysts.
Those discussions will define Newbridge product plans and how it stacks up against competitors, along with internal issues
such as the corporate and expense structures.
Part of that picture is the acquisition of Stanford Telecommunications Inc. (NasdaqNM:STII - news), a $240-million net-cost
deal that closed on Tuesday, Newbridge said. Stanford shareholders on Monday approved Newbridge's offer of $34.22 for
each of Stanford's 14.3 million common shares
Under its new strategy Newbridge will pursue growth in core markets with changes focused on ``fine-tuning' product lines,
rather than scrapping whole areas of technology.
Newbridge's flagship asynchronous transfer mode (ATM) equipment, which sends multimedia data zipping around networks
at high speeds, has lost its lead in the massive U.S. market to Lucent.
But Newbridge is aggressively developing new high-capacity ATM gear and beat some analysts' expectations with the
shipment of its new 50-gigabit switch for field trials last week.
Flynn has already overseen some large-scale changes at the firm, announcing the layoff of 700 staff November 24. Plans are
also under way to contract out global services and mass manufacturing.
``We've done a lot of work internally on the cost structure,' he said. Newbridge aims to cut costs to 36 percent of sales from
46 percent.
``More important than the restructuring, actually, has been the refocusing and we have now gone from three business units to
two.'
Newbridge has funneled work done under an Internet protocol and ``Internetworking' division to two other groups:
broadband access and switching and routing technology. That means more people are working on higher-growth
opportunities, he said.
``We've actually got an embarrassment of riches,' Flynn said. ``It's not like I've got a valley of death.'
Still, the outspoken executive admits that it will take time to sell Newbridge's story to analysts, many of whom have lost faith
in the firm after its repeated financial warnings.
``We have got to earn our respect,' he said, adding Newbridge needs to restore its reputation as a firm of which analysts will
say ``they hit their numbers and they're believable.'
($1=$1.48 Canadian)
((Susan Taylor, Reuters Ottawa Newsroom, 613-235-6745, fax 613-235-5890 |
