Canada's Nortel seen shopping for data firm (How about NT+ASND???)
By Lydia Zajc
TORONTO, June 5 (Reuters) - Northern Telecom Ltd. (NT - news), a huge
telecommunications equipment maker, is seeking to make a match with a data
network firm to complement its voice phone products, analysts said on Friday.
Chandan Sarkar, an analyst at U.S.-based SoundView Financial Group, said Nortel
seemed eager to acquire or merge with Bay Networks Inc. (BAY - news) or
Ascend Communications Inc. (ASND - news)
''They're saying they may need to get aggressive, because they see massive
consolidation going on,'' he said. This week Tellabs Inc. (TLAB - news) bought upstart
Ciena Corp. for $7.1 billion and France's Alcatel Alsthom SA (ALA - news) snapped
up Dallas-based DSC Communications Corp. for $4.4 billion in stock.
Peter Janacek, spokesman for the world's sixth largest telecommunication products
maker, declined to comment on the Bay Networks acquisition/merger
speculation which has wafted through markets for weeks. ''We're not speculating on
rumors, whatsoever,'' he said.
One industry observer said that according to his information, Nortel's majority
shareholder BCE Inc. had sanctioned a Bay Networks deal and that it would be
unveiled this weekend to kick off a U.S.telecommunications trade show.
A few weeks ago Bay Networks, based in Santa Clara, California, acknowledged that
it had been in talks with Nortel, but said that no deal emerged.
Nortel Chief Executive John Roth, who is keen on building networks which can handle
both data and voice to anticipate burgeoning Internet use, has been floating
the idea of buying Bay Networks past institutional investors, said a company observer.
''Basically they (Bay) fill out their data portfolio and they're mostly a voice company
right now, and that's the reason that they're interested,'' Sarkar said. ''They've
already made some strides there but they're possibly inspired to speed that up a little.''
Sprint Corp. (FON - news) laid out plans this week to create its own Internet-capable
network.
Sarkar added that historically, deals are made with an average 30 percent premium on
top of a closing stock price. Bay last fell 0.25 to 30.63 on New York's
bourse. Ascend rose 1.50 to 46.50 on Nasdaq.
Sarkar added that Nortel seemed to be leaning toward Alameda, California-based
Ascend. ''They felt that the business fundamentals were much better at Ascend.
The other thing is Bay already has a relationship with (Nortel rival) Lucent Technologies
Inc. (LU - news)''
Another brokerage had an analyst's report on Friday mentioning the possibility of a deal.
''They were definitely looking at a large acquisition. They didn't specify a
time frame. And they didn't specify a name,'' said one analyst's colleague.
Nortel shares rose C$1.85 to C$92.20 on the Toronto Stock Exchange on Friday.
($1 equals $1.45 Canadian)
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