Bloomberg News at 10:09 a.m. ET
May 13, 1998
Bay Networks Up After It Tells Analysts of Bid From Nortel
Santa Clara, California, May 13 (Bloomberg) -- Bay Networks
Inc. shares rose as much as 19 percent after the company told
analysts it rejected an acquisition offer from Northern Telecom
Ltd. as too low but would consider higher bids.
Bay shares rose 3 1/4 to 27 1/4 in early trading, after
touching 28 9/16. Nortel fell 1 5/16 to 63 1/2.
''It's no longer a question of whether they (Bay) are for
sale, it's now a disagreement over price,'' said Kevin Fong, a
partner with the venture capital firm Mayfield Fund. Fong said he
spoke to Bay executives about the offer.
Chief Executive David House told Wall Street analysts at a
meeting last week that the computer-networking equipment company
would let shareholders decide whether to sell, said two analysts
who attended the meeting, who asked not to be identified.
A spokesman for Santa Clara, California-based Bay was not
immediately available to comment this morning. Nortel declined to
comment on a possible acquisition of Bay.
For NorTel, the purchase of a data-networking company like
Bay ''is not out of the realm of possibilities,'' said Peter
Nicholson, executive vice president of corporate strategy for
NorTel's parent, BCE Inc. of Montreal.
Northern Telecom and Lucent Technologies Inc., the two
biggest makers of telecommunications equipment, are acquiring
networking companies to expand their share of the fast-growing
Internet market. Lucent bought Yurie Systems Inc. for $1 billion
in April and Nortel purchased Aptis Communications for $290
million in March.
Bay's profit and sales in the third quarter ended in March
fell from the second quarter's, in the face of competition from
larger rivals Cisco Systems Inc. and 3Com Corp.
House could be willing to team Bay with a bigger company
that doesn't yet sell computer-networking equipment to large
businesses, analysts said.
''If there's an offer between $32 and $35 (a Bay share), the
deal will happen,'' said Paul Johnson, an analyst with
BancAmerica Robertson Stephens, who rates Bay ''buy.''
At $35 a share, the company would be valued at $7.77
billion, or just more than three times Bay's estimated revenue of
$2.40 billion for the next four quarters.
That price multiple is close to those of other large
networking acquisitions, such as 3Com's 1997 purchase of US
Robotics, said Chris Stix, a Cowen & Co. analyst who rates Bay
''buy.''
Bay would give NorTel a distribution system for networking
equipment sold to large businesses, Stix said.
''It would be a good fit,'' Stix said.
--John Shinal in the San Francisco newsroom (415) 912-2995 |
