Tom,
I think Bay's incorporation into LU or Nortel would create significantly more leverage than COMS/USX did, or even ASND/CSCC. This is because both LU and Nortel have a larger customer base and channels, so could take advantage of the BAY technology more effectively to improve revenues and profits, with the whole (BAY+LU/Nortel) being significantly greater than the sum of the parts.
Nortel and LU also have deeper pockets than ASND or COMS did.
Consequently, perhaps it makes sense for the PS multiple to be greater than the COMS/USX multiple (3.86), and possibly even in the ball park of the ASND/CSCC multiple (9.7) - although a 9.7 PS would be pretty astonishing.
If a bidding war really is starting, it wouldn't be surprising, IMHO, if the final price is at least in the high 40's, and perhaps even in the 50's.
A factor in Lu's favor as a suitor is the major LU and BAY R&D centers in the same geographical area (greater Boston), making collaborative engineering easier. Maybe NorTel has R&D in CA or Boston too, I don't know.
Good luck.
AF
P.S. Don't forget that CPQ is also rumored to be interested in Bay. They wouldn't get the leverage LU or Nortel would from buying Bay, though, as they don't have equivalent telecomms channels or customer base. |
