Glenn,
I'm reposting the article you put on the NN board:
(highlights in the end of article)
Newbridge up on speculation
takeover near
Stock climbs 16%: Alcatel emerging as
frontrunner, but companies silent
Jill Vardy
Financial Post
OTTAWA - Shares in Newbridge Networks Corp. rocketed 16%
yesterday on speculation Alcatel Alsthom is poised to make a bid for the
telecommunications equipment maker.
But the only official news from the company was its intention to sell
some of its shares in CrossKeys Systems Corp.
"We've heard Alcatel bounced around as the most likely prospective
buyer today. That story is making the rounds south of the border as
well," said Robert MacLellan, technology analyst at CT Securities. "Our
purchase target is $33 (US) a share, but we could see it going north of
$40 (US)."
Mr. MacLellan said he's been told Alcatel is conducting due diligence,
but that one other bidder -- possibly Tellabs Inc. -- is close to making a
formal offer as well. "I believe Tellabs is the close runner-up in terms of
getting things done," he added.
Newbridge, Tellabs and Alcatel officials would not comment yesterday
on the rumours.
Newbridge shares closed at $47 in Toronto, up $6.60. In New York,
the stock closed up $4.38 (US) to $32.69 (US).
In the superheated rumour mill surrounding Newbridge these days, even
the company's sale of part of its CrossKeys stake was construed as a
sign it's on the verge of being bought by a larger telecommunications
equipment company. Analysts say they're seeing signs a sale is
imminent.
Jim Kedersha, telecommunications analyst at SG Cowen Securities Inc.,
agreed. "I have a hard time believing the timing is coincidental. You
could look at this and say Newbridge is cleaning up loose ends," Mr.
Kedersha said.
He said he believes Alcatel is the "front-runner" to buy Newbridge.
The company announced on Nov. 18 it was open to all strategic options
to ensure its survival, including its sale to a larger company.
Other companies Mr. Kedersha believes are looking at Newbridge
include MarconiPLC, Nortel Networks Corp. and Tellabs.
It is not clear how these companies' investors would react to news
they're taking a run at Newbridge, which has disappointed markets with
surprisingly poor earnings in previous quarters. The company has
suggested that its third quarter, which ended Jan. 31, will at least match
analysts' expectations.
The acquisition of Newbridge would make sense for Alcatel, Mr.
Kedersha said. "It's not a player at all in the market for carrier-class
ATM [asynchronous transfer mode] switches, which is the place to
be," he noted. U.S. research firm Ryan Hankin and Kent estimates that
the market for core ATM switches like Newbridge's should reach
$8-billion to $16-billion (US) in 2003. Newbridge recently unveiled an
ATM switch that is the fastest on the market.
Meanwhile, Newbridge will begin selling about 1.3 million shares of
CrossKeys next week, lowering its stake in the company to about 3.6
million shares, or about 19.5%. Newbridge holds about 4.9 million
shares, 26.4% of CrossKeys.
Ian McLaren, CrossKeys' chief executive, said it requested the sale to
counter "perception in the marketplace by shareholders and some of our
other partners that CrossKeys is tied to Newbridge."
"There's no magic to why it's happening now. There's nothing to be
read into it," he added. About 55% of CrossKeys business in its most
recent quarter came through Newbridge reselling CrossKeys network
management software. But CrossKeys is looking to expand its business
through other telecommunications-equipment vendors, such as Lucent,
Nortel and Cisco.
Mr. McLaren said that while he expects the volume of CrossKeys'
business through Newbridge to go up, it will likely decline as a share of
CrossKeys' revenue as it sells more software through other channels.
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