Newbridge share price
continues to soar
Karyn Standen
The Ottawa Citizen
Newbridge Networks Corp.'s share price continued to soar yesterday,
one day after the Kanata networking-equipment company was
rumoured to have signed a $750-million U.S. contract to provide
asynchronous transfer mode (ATM) equipment to Global One, a
partnership of Sprint Corp, Deutsche Telekom AG and France
Telecom.
Newbridge's stock was up $3.75 to close at $40.35 yesterday as nearly
three million shares traded hands on the Toronto Stock Exchange.
Indeed, the company's share value has increased nearly 19 per cent in
the last week.
In New York, Newbridge's shares were up $2 3Ú4 to close at $26
1Ú4 yesterday, again in heavy trading.
Terms of Newbridge's possible deal with Global One, including how
much of the contract would go to Newbridge, were not available.
Newbridge denies signing the contract.
Industry analysts, however, say the rise in Newbridge's stock is due in
large part to an increase in telecommunications companies' share values
in general.
The rise in technology issues has seen giants such as Cisco Systems Inc.,
3COM Corp., Ascend Communications Inc., and Lucent Technologies
Inc. recently at or near their 52-week highs.
While Nortel's shares on the TSE remain significantly off their 52-week
high of $100.25, posted May 21, the company has nevertheless seen its
stock climb nearly eight per cent in the last week.
Howard Sutton, portfolio manager at Toronto's Tera Capital Global
Technology Fund, says a "huge amount" of capital has poured into the
technology sector in the past 12 weeks as investors, primarily chased
away by the market melt-down during the summer, regain confidence in
the markets.
"Money in the U.S. is looking for stocks that have good prospects.
We've wiped out that bubble," Mr. Sutton said in reference to the
summer market slump.
As an example of the increased size of financial reserves, Mr. Sutton
said, $180 billion is currently invested in U.S. money-market mutual
funds, compared with $40 billion sitting in those funds at the end of last
year.
Paul Silverstein, an analyst with U.S.-based BancBoston Robertson
Stephens, agrees "there's a lot of money out there."
"The communications industry is in the second to third year of a 15- to
20-year build-out of a WAN (wide-area network)-packet infrastructure
by the world service providers," he said. "There's going to be a lot of
money spent on building these networks. That's going to be to the
benefit of companies such as Ascend, Newbridge, Northern Telecom,
Lucent and Cisco."
Nevertheless, Mr. Silverstein says actions recently taken by Newbridge,
including recruiting Alan Lutz as president in the summer and organizing
the company into three groups based on its WAN-packet, time division
multiplexing (TDM) and local area network (LAN)-packet product lines
respectively, have gone far to boost Newbridge's standing in the
investment community.
Newbridge's shares hit a 52-week low of $23.85 on the TSE on Oct. 9,
and remain significantly short of their 52-week high of $68.10, posted a
year ago today.
"The old Newbridge, before Alan Lutz, was overpromised and
undervalued," Mr. Silverstein said. "The Newbridge today is a very
different company than it was six months ago. It continues to move in the
right direction, so (investor) perception is starting to change about the
company."
Indeed, Mr. Sutton expects Newbridge' share price in New York to
continue to rise to the "mid-30's".
Newbridge is expected to release its second quarter earnings for fiscal
1999 on Tuesday. |
