Telcos talk takeover rumours
Lucent merger could pressure hi-tech firms
By SUSAN TAYLOR, Ottawa Sun
NETWORK giants Nortel and Newbridge may be in for a
rocky ride if Lucent Technologies Inc.'s rumoured $16-billion US
takeover of Ascend Communications Inc. goes ahead.
A deal likely spells increased speculation of a Newbridge
takeover and means a more powerful competitor for both
Newbridge and Nortel.
Lucent could announce the Ascend purchase as early as
Wednesday, the Financial Times of London reported. USA
Today also reported the rumoured acquisition yesterday.
That deal -- another sign of consolidation in the network sector
-- would parallel Nortel's $9.1-billion bid for Bay last year.
Lucent, a leader in traditional phone networks, would be
combined with Ascend, which sells Internet and computer
networking gear.
"Put the two together and you have that much more formidable a
competitor," said Paul Silverstein, a senior communications
analyst with BancBoston Robertson Stephens.
The deal would put additional pressure on competing firms, such
as Ericsson, Alcatel and Siemens, to bolster their data arsenal
with an acquisition.
"There's a finite number of dance partners out there and one of
them just got married," said Duncan Stewart, a Tera Capital
Corp. partner who manages the Navigator Canadian Technology
Fund.
"The obvious response is to go out and buy the next best thing,"
said Silverstein.
"There's only one company of really any substance ...
Newbridge."
Both Ascend and Newbridge sell Asynchronous Transfer Mode
equipment, or ATM, that chops up digital data; whether it's
voice, computer data, or video; into matching bits and then sends
them over networks at high speeds.
Newbridge's stock rose yesterday, up 70cents on the TSE to
close at $49.75 and 81cents in New York to end at $33.25
The market viewed the deal's impact on Nortel nervously. The
stock fell $2.10 on the TSE to close at $82.15 and $1.19 to
$54.25 in New York.
"It won't have a huge effect on Northern Telecom right off the
bat, but long-term it's obviously going to be competition for
them," said Phil Stafford, head trader at TD Asset Management
Inc.
The takeover should be taken with a grain of salt, said one
analyst.
"It's a rumour," said Gurinder Parhar, with HSBC James Capel
Canada Inc. "These rumours have been around since July of last
year."
But he admits the deal does fit with the sector's move towards
consolidation and adds to Newbridge's appeal as a takeover
target.
Since its spinoff from AT&T Corp. two years ago Lucent has
spent more than $4 billion on 17 acquisitions to fill out its product
line.
Yesterday it paid $1.48 billion in stock to buy Kenan Systems,
which makes software that phone companies use to send one bill
combining traditional calls with wireless, cable TV and other
services. |
