From today's Financial Post:
For Tuesday, February 15, 2000
Newbridge squeezed by
Nortel-Tellabs deal
Investors grow nervous
By JILL VARDY
The Financial Post
OTTAWA - As market rumours continued
yesterday that Newbridge Networks Corp. is
pushing to sign a takeover deal by next week
the company stayed silent.
Newbridge will announce its third-quarter
results on Feb. 22 and analysts believe it wants
a deal in place by then.
News yesterday that Nortel Networks Corp.
and Tellabs Inc. have signed a cross-licensing
agreement initially sent Newbridge stock down
-- it was off 8% at one point -- but it
rebounded later in the day to close up 10c at
$48.75.
Analysts say investors are growing fearful
Newbridge may be having difficulty
concluding a deal that would see French
telecom company Alcatel SA, or some other
big networking company, buy it. Rumours flew
last week that a purchase agreement with
Alcatel would be announced by last Friday.
"According to some people, it was supposed
to happen Friday, and it didn't. And it doesn't
seem imminent today. So people are saying,
Let's take a bit of money off the table," said
Duncan Stewart, technology analyst and partner
at Tera Capital Corp. "Every day that goes by,
people become more worried that it's not going
to happen."
The licensing agreement between Nortel and
Tellabs allows each company to access the
other's optical networking patent portfolios.
Nortel will get royalty payments as a result of
the deal, but no other details were provided.
Analysts say the deal will have little impact
on Newbridge, which competes with both
Nortel and Tellabs, but not in the optical
networking side of the telecommunications
business.
Some investors appeared to conclude the
alliance may reduce the number of companies
interested in buying Newbridge, which
announced on Nov. 18 that it is entertaining
takeover offers.
"Every time a potential bidder joins or leaves
the party, the stock moves up or down like a
yo-yo," said one analyst, who asked not to be
named.
Nortel said it will spend $260-million (US)
and hire 3,400 people to boost its production
of fibre-optic equipment.
Nortel predicts its fibre-optic business will
jump by 30% in 2001. To help meet the
demand, the company will spend about
$64-million (US) on two facilities in England,
$102-million (US) in Ottawa (creating 1,000
jobs in that city alone) and another $84-million
(US) in Montreal (with another 1,000 jobs
created).
Meanwhile, the agreement between Nortel
and Tellabs will strengthen the long-term
competitive position of both companies, the
firms said yesterday. Typically, these
agreements generate some cash for the patent
holders -- Nortel in this case -- and prevent
legal battles from arising as firms bring out
similar technologies. |
