Technology stocks soar
By SUSAN TAYLOR, Ottawa Sun
LOCAL hi-tech stocks rode a tide of soaring values yesterday,
buoyed by a bull market.
Analysts tied the strong showing to a market correction, renewed
confidence and huge investments in hi-tech firms on American
markets.
Newbridge Networks had one of the best performances, gaining
$3.75 on the Toronto Stock Exchange to close at $40.35. On
the U.S. Nasdaq, shares rose $2.75 to end the day at $26.25.
That boost is likely tied to rumours of a $750-million deal
Newbridge has signed with the Global One Communications
Alliance.
But one analyst who closely follows the firm, and asked not to be
named, said that estimate is inflated.
"There's probably some substance to it, but nowhere near what
has been bandied about in the press," he said. "It's totally, totally
out to lunch."
Only if all three members of the consortium -- Sprint Corp.,
Deutsche Telekom AG, and France Telecom -- bought the
maximum quantity of equipment they could from Newbridge over
several years would it hit $750 million, the analyst said. And
that's unlikely. Sprint uses only Cisco equipment in its domestic
networks and is now testing new Nortel ATM equipment. Sales
to Deutsche Telekom and France Telecom would add up to
substantially less than the rumoured deal -- perhaps $200 million
over two years, the analyst suggested.
Newbridge is also rumoured to be advising analysts with
high-end projections for the the second half of 1998 to drop
them by 5cents. "That doesn't apply if you have a $750-million
deal," the analyst said.
Newbridge won't comment on the speculation, but did point out
president Alan Lutz had a warm welcome from analysts at a SBC
Warburg Dillon Read Inc. conference in New York Tuesday.
"The stock started to turn around almost simultaneously," said
spokesman John Lawlor. "The message getting back from
financial analysts is there is an increasing interest ... in Newbridge
stock."
Newbridge also announced yesterday a 33% stake in a new
affiliate, U.K.-based Ubiquity Software Corp. That takes the
networks firm into the call centre equipment market, worth $3-5
billion annually.
"We're competing into that market with new technology," said
Chris Albinson, assistant vice-president of affiliate products.
Ubiquity sells software that uses the Internet for call centre
services. That helps link people from several locations for one
centre service, links computers using different platforms and
integrates voice and data to the desktop.
But Newbridge wasn't the only area hi-tech firm watching its
stock soar.
"We've got a correction coming on the upside," said Fred
Ketchen, managing director of equity trading at Scotia McLeod
Inc. "We're seeing a little bit more of a feeling of comfort."
The markets may now realize currency crises haven't hit as hard
as anticipated and investors who got spooked during recent
slumps are back buying, Ketchen suggested.
Nortel Networks was up $2.85 on the TSE to close at $73.50
and up $1.75 on the Nasdaq to end the day at $47.44. Cognos
rose $2.55 on the TSE and gained $1.69 on the Nasdaq. JDS
Fitel was up $1.25 and CrossKeys rose 90cents on the TSE.
Few firms saw a decline. WorldHeart dropped 13cents on the
Nasdaq, though it was up 25cents on the TSE. Mitel fell
20cents to close at $11.60 on the TSE.
Howard Sutton, manager of the Tera Capital Technology Fund,
said the majority of Canadian hi-tech stocks trading on U.S.
exchanges got a shot of adrenaline.
"What tech stock is not going up today?" he asked. "There's just
a huge amount of money going into them in the U.S."
Market sentiment in the States appears to have shifted in favour
of hi-tech stocks after months of investor nervousness, he said.
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