WALL STREET JOUR.( PAGE 10 ) : France's Alcatel Is Holding Talks On Acquiring Canada's Newbridgeÿÿÿÿÿÿÿÿÿÿÿÿÿÿ
February 18, 2000ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ WALL STREET JOUR : France's Alcatel Is Holding Talks
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ On Acquiring Canada's Newbridge
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ interactive.wsj.com
ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By ANITA RAGHAVAN, JOEL BAGLOLE and KEVIN J.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ DELANEYÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Staff Reporters of THE WALL STREET JOURNAL
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ France's Alcatel SA is in talks to buy Canada's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge Networks Corp. for more than $6.5 billion in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ stock, people familiar with situation said. A deal could
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ be announced as early next week, they said.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ A purchase of Newbridge would further Alcatel's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ strategy of bringing its technology product offerings up to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ date through acquisitions. Last year, Alcatel bought U.S.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ data networking companies Xylan Corp., Assured
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Access Technology Inc. and Internet Devices Inc. as part
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of its effort to keep pace with networking giants such as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Cisco Systems Inc. and Lucent Techonologies Inc.,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which have lured some of Alcatel's customers away.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Although precise details of the deal couldn't be learned
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Thursday night, analysts said Newbridge executives
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ have told them a deal could be announced as early as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ late next week after it announces better-than-expected
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fiscal third-quarter results.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ According to the consensus of analysts surveyed by First
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Call/Thomson Financial, Newbridge is expected next
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Tuesday to report earnings of 11 U.S. cents a share for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the quarter ended Jan. 31. A year earlier, it earned,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ including nonrecurring gains, 120.1 million Canadian
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ dollars ($82.6 million), or 66 Canadian cents (43 U.S.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ cents) a diluted share.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In 4 p.m. New York Stock Exchange composite trading
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Thursday, Newbridge shares rose 56.25 cents to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ $35.125, giving it a market capitalization of around $6.4
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ billion.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ A Newbridge spokesman declined to comment on the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ talks. "It remains speculation," said an Alcatel
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ spokesman. "We have no comment on speculation and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rumors," he said.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel Acquisition Binge
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel has been on an acquisition binge in recent years
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ in an attempt to transform itself from an old-style maker
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of telecommunications equipment to a modern
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ data-networking company.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge, meantime, underwent a substantial
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ restructuring this past quarter, laying off 10% of its work
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ force, or about 600 employees, and installing Pearse
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Flynn as the new president after the company failed to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ meet expectations in six of the last 10 quarters.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ For the past year and a half, Newbridge has tried to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ boost its market share in the U.S. to compete better
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ against rivals Cisco, Lucent and Nortel Networks Corp.,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ though it hasn't been very successful. Indeed, its poor
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ performance last quarter was blamed on its failure to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ penetrate the U.S. market. Newbridge is based in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Kanata, Ontario, a suburb of Ottawa.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Benefits for Both Sides
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Paul Silverstein, senior analyst at Robertson, Stephens &
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Co., said that Alcatel will gain talented engineers, great
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ products and a strong customer base by acquiring
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge. Newbridge, in turn, will benefit from
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel's solid management team. Newbridge has been
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ viewed as having suffered from poor management.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel's latest move continues the company's foray into
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the crucial U.S. market. The U.S. is now its biggest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ market, contributing more than 20% of sales. That's a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ change from just a few years ago, when Alcatel sold
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ most of its products in France.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In the summer of 1998, Alcatel surprised investors by
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ acquiring DSC, one of the biggest providers of telephone
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ equipment to the U.S. regional phone companies, for $4
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ billion. Alcatel traditionally has been strong in supplying
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ transmission equipment to long-distance carriers. The
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ DSC deal helped the company significantly broaden its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ footprint in the U.S.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Companies such as Alcatel are being driven to buy
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ telecommunications-equipment makers such as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge to enable them to exploit the Internet and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ telecommunications markets. Newbridge builds switches
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that allow voice, video and data to travel over networks
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ at high speeds.
---------------------
The above is the main article as it appears inside the paper,
TA |
