Globe and Mail: 12-15-99: Newbridge to trim older business. Part of 'go-it-alone' strategy, new COO says
globeandmail.ca
Newbridge to trim older business
Part of 'go-it-alone' strategy, new COO says
SIMON TUCK
Technology Reporter
Wednesday, December 15, 1999
Ottawa -- Newbridge Networks Corp. will cut back its older, declining business, as part of a broader
"go-it-alone" strategy that will allow the company to compete on its own if it isn't sold.
Pearse Flynn, the communications equipment maker's new president and chief operating officer, said in an
interview yesterday that Newbridge will announce tomorrow that it's shifting more than half of the employees
who work in its older time-division multiplexing unit -- about 110 from a group of about 195 -- to its
higher-growth switching group.
Mr. Flynn said cutting the number of product permutations and placing more emphasis on its key market will
allow Newbridge to "chase the big rabbits." That leaner approach will allow Newbridge to increase profits
and remain successful if it isn't sold, he added.
"We have a go-it-alone plan," said Mr. Flynn, defying the consensus among analysts that Newbridge will
have problems competing on its own. "I don't think the company needs to be sold."
Newbridge said last month that it was considering its strategic options, including its sale, sparking a flurry of
interest from other, larger companies.
The company's board of directors is scheduled to meet tomorrow morning to discuss the new strategy.
That will be followed later in the day by the company's second all-employees' meeting in less than a month.
At the last meeting, company founder and chief executive officer Terence Matthews told employees that
Newbridge is open to being sold, and listed four telecommunications giants -- Nortel Networks Corp. of
Brampton, Ont.; Alcatel SA of France; L.M. Ericsson Telephone Co. Inc. of Sweden; and Cisco Systems Inc.
of Santa Jose, Calif. -- as possible suitors.
Since then, speculation has been rife about which industry giant would buy Newbridge.
Industry sources have said that all of the leading candidates have shown behind-the-scenes interest, although
executives from Nortel, Ericsson and Alcatel have said it's unlikely that they'll buy Newbridge.
Mr. Flynn said yesterday that the company is not involved in takeover talks. "We're not talking to anybody
right now."
Analysts throughout North America have been virtually unanimous in their belief that Newbridge should be
sold to a larger telecommunications company so the combined operation can offer more market reach and a
broader product portfolio.
Gurinder Parhar, a technology analyst at Dundee Securities Corp. in Toronto, said remaining solo would be a
lot more difficult for Newbridge than finding a suitable partner. "I hate to say it's impossible, but it's a lot
more difficult to be on their own," he said. "It becomes a very difficult proposition in the current
environment."
Newbridge's main problem is that it has lost ground in its key product market -- a switching technology called
asynchronous transfer mode [ATM] -- in the United States, the most lucrative geographic market, to Lucent
Technologies Inc. of Murray Hill, N.J. The gap between the two competitors now stands at about 4 per cent.
But Mr. Flynn said the company has already seen an improvement in U.S. sales in the early part of the quarter
that started Nov. 1. The sales jump, he said, can be attributed to a leadership change within the company's
North American sales division. "The speed of an organization comes from the leader. If the leader is
dynamic, the organization will be dynamic."
The company says it has reason to be optimistic about its future position in that lucrative market. Newbridge's
new 50-gigabit switch is being tested in lab trials by two important customers: SBC Communications Inc. of
San Antonio, Tex., and BT PLC. Its next major release, Mr. Flynn said, will be a 450-gig switch that is
scheduled to be released in about six months, and which should give Newbridge a technological lead over its
competitors.
The company also said yesterday it has completed its acquisition of Stanford Telecommunications Inc., a
California wireless company that Newbridge agreed to buy earlier this year. Stanford shareholders have
agreed to accept Newbridge's offer of $240-million (U.S.) in cash and stock. |
