Newbridge Strikes Multimillion-Dollar Deal
By Susan Taylor
OTTAWA (Reuters) - Network gear supplier Newbridge Networks Corp. (Toronto:NNC.TO - news)(NYSE:NN -
news) has struck a multimillion-dollar deal to supply Ireland's national phone company with technology that it is
considering separating from the firm and selling off.
Ottawa-based Newbridge confirmed that it had made a deal, initially valued at $16 million, to supply a range of digital
subscriber line (DSL) equipment to Ireland's eircom Plc (NYSE:EIR - news).
Speculation that Newbridge may separately sell its digital subscriber line (DSL) division surfaced on Monday on the
Financial Times' Web site that reported Newbridge was considering the spinoff and public ''float'' of that business.
Newbridge has been on takeover watch since announcing it had hired an investment banker and was open to offers when
it reported weak second-quarter results on November 18.
''It may not be a straightforward, one buyer takes all situation,'' said a highly-placed source within Newbridge. ''It might
be that the sum of the parts are potentially more valuable than the whole.''
Newbridge's DSL gear allows phone companies to offer such services as broadcast television, movies and music on
demand, fast Internet access and phone service -- all through traditional copper phone lines.
The DSL products could be of interest to companies that supply, distribute or broadcast content, the source suggested.
''Newbridge is considering all its options and partnership or acquisition may well be among those options,'' the source
indicated. ''There's no rush to make that decision...there's a plethora of strong choices before us.''
The eircom contract could expand, Newbridge said, pending the outcome of technology trials now underway in advance
of a planned national roll-out.
Newbridge recently struck a DSL sale worth more than $200 million with Vancouver, Washington-based New Edge
Networks, and struck an earlier deal with British carrier Kingston Communications Plc (KCOM.L), which runs the public
phone network in Hull, England.
Newbridge's DSL gear, called 3DSL because it covers a multidimensional, or 3D, range of technology, includes such
equipment as content servers and licenses, billing software, set-top boxes and access equipment.
The sector is showing increasing signs of interest, underscored by the January 6 purchase of DSL developer Promatory
Communications Inc. to Nortel Networks Corp (Toronto:NT.TO - news) (NYSE:NT - news) in a stock deal valued at
up to $778 million.
''It could potentially make some sense,'' said Rob MacLellan, analyst at CT Securities in Toronto. ''They may be having
discussions with vendors and realizing that they're not getting the dollars for the non-ATM part that they thought they
could.''
Newbridge's flagship high-speed switches are based on asynchronous transfer mode (ATM) technology. The firm also
has wireless products and older time division multiplexing technology.
''If the rumor is true -- it's a big if -- what might be starting the discussion is, or the thought processes within the company
is, the market's hot, if you've got a talented banking team with some talented analysts you could probably do a very good
job spinning it off,'' MacLellan said.
''There would be some marketing difficulties because of the current penalty box that Newbridge is in, but I think you
could get potential buyers to look beyond the shadow of Newbridge.''
Newbridge issued its sixth earnings warning in 10 quarters in early November along with the resignation of its president. |
