Dow Jones - Bay Networks,Talk :Nortel,Lucent Seen As Possible Suitors
May 28, 1998 3:55 PM
A number of sources have said Bay Networks appears
willing to consider offers from interested suitors, and
several said they have heard that the company has
instructed its investment bankers to prepare financial
documents about the company to show potential buyers.
Bay Networks has been struggling to compete against
Cisco Systems Inc. (CSCO), the undisputed leader in
the computer networking industry, for some time.
Bay's disappointing March quarter results highlighted
that it was having some trouble ramping up its new line
of Accelar routing switches and that it faces a lot of
competition in the market for low-end workgroup
switches.
Wall Street has been speculating that it would make
sense for the big phone equipment companies to buy
data networking companies - including Bay Networks -
as the voice and data transmission markets begin to
converge. Only Cisco, which has been actively building
up its presence in the voice transmission market, is not
seen as a likely target since its leading market position
has made it quite expensive.
In addition to Nortel, Lucent Technologies Inc. (LU) has
also been named as a potential suitor for Bay.
Lucent, a giant in the voice equipment market, has been
actively acquiring and developing data networking
technology. The company is currently prohibited from
transacting pooling of interest deals because the it was
spun off from AT&T Corp. (T). But this two-year
moratorium will expire in October - giving Lucent more
flexibility to make large acquisitions.
Alcatel Alsthom (ALA), Ericsson Telephone Co.
(ERICY) and Siemens AG are also seen as possible
buyers for Bay.
Hambrecht & Quist Inc. analyst Farrokh Billimoria
noted that the takeover talk on Bay is likely to be
around for a while.
Sanford C. Bernstein & Co. analyst Paul Sagawa said
he does not believe Bay would accept an offer lower
than $40 a share, which would total about $9.2 billion.
He added that he believes the company could sell for 4
times sales - or about $42 a share - and possibly as high
as 4.5 times sales - or about $48 a share.
- Joelle Tessler; 201-938-5285
smartmoney.com |
