NEWS ARTICLE: "Newbridge stock hit by rumors"
Friday, January 9, 1998
LINK: canoe.ca
"Newbridge stock hit by rumors"
By AMANDA LANG
Technology Reporter The Financial Post
Shares of Newbridge Networks Corp. fell 9% yesterday amid rumors of weaker sales in the coming year and increased competition from its
biggest rival, Cisco Systems Inc. The stock has fallen $8.45 in the past two days.
Newbridge's shares (nnc/tse) fell $4.80 in Toronto yesterday to close at $46.55, and (nn/nyse) dropped US$3 3/8 in New York to close at US$32
1/2.
Analysts said rumors began to circulate Wednesday that Newbridge was advising some institutional investors to lower their expectations for
sales in the two fiscal years ending April 30, 1999. Although Newbridge said that is not the case, the rumors gained credibility after one
Canadian analyst lowered his earnings estimates on the company.
But TD Securities Inc. analyst David Beck's new target is squarely at the mean of other analysts' expectations of $1.49 a share, and he
maintained his "buy" rating on the stock.
Meanwhile, analysts said the stock may be reacting to Cisco's increased investment in Skystone Systems Corp., an Ottawa-based company it
acquired last June. That is troubling because Skystone's products rival Newbridge's asynchronous transfer mode (ATM) products, which are
its fastest-growing product group.
Investors are counting on sales from Newbridge's ATM products to help offset lacklustre growth from its other products, including its
troubled UB Networks unit.
Newbridge will take a writedown for UB this quarter, which ends Jan. 31.
There was some good news yesterday for the company: MCI Communications Corp. renewed its marketing alliance with Newbridge for two
more years. There had been concern its merger with Worldcom Inc. would cause MCI to withdraw from the alliance, said Rob MacLellan,
analyst at SBC Warburg Dillon Read Inc., who yesterday repeated his "buy" rating on the stock, with a 12-month target of US$60 to US$65.
Analysts said recent economic turmoil in Asia will not affect Newbridge much, since only about 5% of its total sales are to countries in
distress -- most of its Asian sales are to China.
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-- Paul |
