Doug and all, here is another Dow Jones article which doesn't seem to have been posted yet. Nothing really new.
May 28, 1998 4:35 PM
More Rumors Make The Rounds Regarding A Sale Of Networking Firm Bay
NEW YORK -(Dow Jones)- Shares of Bay Networks
Inc. advanced Thursday on renewed chatter that a
long-rumored sale of the computer-networking
equipment maker may be in the works.
Bay shares (BAY) closed Thursday at $28.375, up
$2.50, or nearly 10%. Acquisition rumors have been
swirling around Bay since mid-March when the
company warned it would miss earnings expectations.
The takeover talk intensified about two weeks ago after
a report surfaced that the company rejected an offer
from Canadian telecommunications-equipment maker
Northern Telecom Ltd. Bay denied the report, but its
response has done little to stop scuttlebutt that NorTel
could come back with a higher bid.
One market player told Dow Jones that talk has heated
up again over the past two days on unconfirmed rumors
that some banks have taken positions in Bay. Investors
interpreted that as a bullish sign, but "may just be
speculating like everyone else," the trader added.
Trading in Bay's call options was extremely heavy
Thursday.
Sanford C. Bernstein & Co. analyst Paul Sagawa
doesn't 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 four
times sales - or about $42 a share - and possibly as high
as 4.5 times sales - or about $48 a share. Rumors are
circulating that Bay has instructed its investment bankers
to prepare financial documents for potential buyers.
Santa Clara, Calif.-based Bay has been closely watched
because it stumbled badly in one of the technology
world's hottest markets. When it was formed by a 1994
merger, Bay's sales surpassed those of current market
leader Cisco Systems Inc. Cisco and others targeted
and won the lion's share of the Internet business.
For the fiscal third-quarter ended March 28, weak
demand and pricing pressures drove Bay's earnings well
below analysts' expectations. The performance threw
into doubt the strength of the company's recovery.
David House, a longtime Intel Corp. executive who
became Bay's chief executive officer in 1996, in March
said confusion about new industry standards in many of
the company's product areas delayed purchase
decisions by customers. In particular, Bay hasn't posted
the strong sales of its new Accelar switiching products
that it had forecasted. Analysts say Accelar is a
top-notch product but that it can't carry the whole load
for the company.
In addition to timing and product-transition issues, some
of Bay's troubles have also come from the fact that the
once spectacular growth rates in the overall networking
industry have cooled off a bit in recent quarters.
Bay Networks has found itself facing competition from
Cisco and 3Com Corp. in low-end workgroup
switches, a market that Bay had to itself until late last
year. Many of Bay's products are becoming more like
standard commodities, subject to intense competitive
pressures from Cisco and 3Com.
Bay's troubles come amid a rapid convergence of the
voice and data networking industries. Companies in both
industries are stockpiling promising technology and
forming key alliances to develop gear that can handle
voice, video and data simultaneously. Both NorTel and
Lucent Technologies Inc., NorTel's archrival in telecom
equipment, have been very active in recent months. Both
have picked up companies that develop gear to help
connect Internet-service providers, computer users and
corporate networks.
Just last month, Lucent announced a $1 billion deal to
acquire Yurie Systems Inc., a maker of advanced
networking gear. Lucent has in the past been mentioned
as a possible suitor for Bay.
Companies considered most interested in Bay include
NorTel, French company Alcatel Alsthom SA, Swedish
telecommunications-equipment group Telefon AB L.M.
Ericsson and German conglomerate Siemens AG.
Compaq Computer Corp., Intel Corp. and Fujitsu Ltd.
have also been mentioned as possible suitors, although
these companies are seen as less likely possibilities.
If any of these companies are interested in Bay, they
may want to make a bid before October, when Lucent
will be free to do a pooling of interest acquisition. Lucent
is currently prohibited from making pooling deals
because of terms of its 1996 spinoff from AT&T Corp.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved. |
