From DLJ's TECHdaily today regarding NT:
Cambrian...specializes in MAN (metropolitan area network). Nortel's public carrier networks division is already pumping out various other forms of DWDM equipment (mainly for backbone applications), and Cambrian's product (currently in the development/testing stage) is apparently ahead of Nortel and its various competitors in this niche area of the DWDM market. Cambrian is not currently generating revenues, but product is being tested by three carriers and is expected to be available by the middle of 1999. The acquisition is expected to be neutral to operating earnings in 1999 (keep in mind that there is going to be a write-off of in-process R&D), and accretive to earnings in 2000.
So, NN and TM sold a company that had not delivered product yet, and would require ramping up money prior to distribution to Nortel who needed the niche piece of hardware to stay competitive.
Now let's see. That means NN does not have to shell out cash to get Cambrian up to the point where it can actually make money, or have revenues for that matter, and they get cash for the war chest now to stay focused on making NN a better company. And if NT does not get any accretive benefits until 2000, do you think NN would have had any? It probably would have taken NN 5 years to get Cambrian where NT can get them in a year because of the benefits to Cambrian of immediately being intergrated into the NT family of products as opposed to going it alone under the NN affiliate program.
This is a win-win if ever I have seen one. Not short sighted either. NN gets cash and gets out of spending both management time and the company's money, and NT gets product expansion of a unit that will require launch. Oh, and NN keeps the ability to get the Cambrian product and no doubt a favorable supply agreement, too.
Research helps stay emotion,IMHO. (-8 Dennis 8-) |
