Newbridge Networks Says It's Close to Completing 2 Acquisitions
Newbridge Networks Says It's Close to Completing 2 Acquisitions
Kanata, Ontario, Feb. 12 (Bloomberg) -- Newbridge Networks Corp., the No. 5 maker of networking
equipment, is close to completing two acquisitions to add more data-networking features to its
products, President Alan Lutz said.
Newbridge also is in talks to buy three other companies, and agreements could be reached within four
months, Lutz said in an interview. He declined to name the candidates, though said the companies make
software and hardware such as routers that would give Newbridge the Internet technology used on
data networks. Many are startups with little or no revenue, he said.
Phone companies and corporations are demanding that networking equipment, once used for voice calls
only, carry the mushrooming amount of data traffic from businesses and the Internet. Newbridge,
which a week ago warned that its fiscal third- and fourth-quarter profit won't meet forecasts, lags
Cisco Systems Inc. and others in such data-networking products. ''Newbridge loses out on a lot of
(sales) opportunities'' because it lacks products that use Internet technology, said Michael Neiberg, an
analyst at ING Baring Furman Selz LLC, who rates Kanata, Ontario-based Newbridge ''buy.''
Lutz said he's looking at companies that specialize in products based on Internet protocol, or IP, the
standard used to send information around the Internet and most data networks. That's a change for
Newbridge, which pushed its asynchronous transfer mode, or ATM, technology before Lutz was hired
in June.
Candidates
The companies Lutz is targeting develop high-speed IP routers, which direct traffic on data networks.
He's also seeking equipment that takes data from office buildings and puts it onto central phone
networks, and software that helps manage networks. ''We have deficiencies in the IP area'' that need
to be remedied, Lutz said.
Acquiring IP products would help Newbridge catch up to rivals. Cisco, which dominates the router
business, already has designed or acquired similar technology.
While Cisco shares have risen 7.4 percent this year, Newbridge has tumbled 19 percent.
To gain IP-routing technology, Newbridge may target one of a number of companies that are
developing ultra-high capacity routers to compete with Cisco equipment.
They include Juniper Networks Inc. of Palo Alto, California; Silver Spring, Maryland-based Torrent
Networking Technologies Corp.; Avici Systems Inc. of Chelmsford, Massachusetts; Littleton,
Massachusetts-based Argon Networks; and Cupertino, California-based Pluris Inc. All are closely
held.
Newbridge also plans to acquire software based on a technology known as SS-7, which adds features
like voice-mail and caller ID to ATM switches and packages them on a single bill. Carriers that provide
data and Internet services want products that let them offer those features.
Building Blocks
One company Newbridge may want to buy or team up with is closely held Trillium Digital Systems
Inc., analysts said. Trillium, founded in 1988 and based in Los Angeles, makes the building blocks
known as protocol stacks that other companies use to develop SS-7 software.
Motorola Inc., Sun Microsystems Inc. and others use Trillium's technology in their SS-7 products. ''If
I were Newbridge, I'd try to partner with Trillium,'' said Patrick Houghton, an analyst with Sutro &
Co., who rates Newbridge ''buy.''
Newbridge rival Ascend Communications Inc. bought Stratus Computer Inc. last year to gain SS-7
technology. Ascend has since agreed to be bought for $18.1 billion by Lucent Technologies Inc., the No.
1 phone-equipment maker.
Lutz said he prefers acquisitions that have a minimal impact on profit and would avoid ones that
require the company to issue a lot of new shares or add significantly to costs. And he doesn't want to
drain the company's C$900 million (US$604 million) in cash.
That may exclude Calabasas, California-based Tekelec, which makes SS-7 products, from
Newbridge's shopping list. Tekelec has a market value of about US$690 million and sales of US$176.7
million last year.
In addition, Tekelec makes hardware used in SS-7 networks. Analyst Houghton said Newbridge needs
SS-7 software. ''I don't think (buying) Tekelec will give Newbridge what it needs,'' he said.
NYSE/AMEX delayed 20 min. NASDAQ delayed 15 min.
|
