Newbridge wins contract to supply global network
Thursday, March 11, 1999
SIMON TUCK
Technology Reporter
globe & mail
Ottawa -- Newbridge Networks Corp. let out one of the worst-kept secrets on Bay Street yesterday
when it officially said it has won a five-year contract to supply telecommunications equipment for a new
global network.
The announcement ends more than five months of widespread speculation that Newbridge and Siemens
AG,its German partner, had landed a key role worth an estimated $500-million (U.S.) in building the
new network and follows a series of unofficial confirmations from Newbridge officials.
"Newbridge has desperately wanted to announce this for a long time," said Duncan Stewart, a portfolio
manager at Tera Capital Corp. in Toronto.
The new network is being built by a consortium called Global One, which includes Deutsche Telekom,
France Télécom and Sprint Corp. The Global One network will offer high-speed links between key
business centres in North America, Asia and Europe and will start by focusing on the corporate market.
Newbridge is supplying the new network with high-speed asynchronous transfer mode (ATM) switches
that act as a backbone for voice, data and multimedia services.
While Newbridge's win has been anything but a mystery, the value of the contract has still not been
released. Earlier estimates of the value of the Newbridge-Siemens share ranged between $300-million
(U.S.) and $800-million but analysts said yesterday that it will likely be worth about $500-million. Most
of that money will go to Kanata, Ont.-based Newbridge, which makes the switches.
Spokesmen for Newbridge and Siemens wouldn't put a figure on the deal. "Obviously, five years is a
huge amount of time in the network industry," said Paul Goyette of Newbridge. "Things can change
over time."
The contract had been so widely expected that it had only a marginal impact on investors. Newbridge
shares jumped $1.55 to $43.70 on the Toronto Stock Exchange yesterday.
"It's obviously positive news for them but the market has been anticipating it for a couple of months,"
said Gurinder Parhar, an analyst at HSBC Securities in Toronto. "I think most people have put those
numbers into their models."
In fact, Newbridge had already built it into their operations as well. Mr. Goyette said shipments to
Global One started more than three months ago.
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