Fore Systems Inc.
Dow Jones Newswires -- March 22, 1999
Fore Systems Shrs Up 11% As Takeover Rumors Persist
By Nancy Beiles
NEW YORK (Dow Jones)--Investors are betting that Fore Systems Inc. (FORE) will be the next data-networking company to attract a takeover offer.
Fore shares, which rose 10% Monday after gaining 17% Friday, have skyrocketed as takeover rumors, long associated with the Warrendale, Pa., company, intensified.
Wall Street observers say that the company, which is among the dwindling ranks of publicly traded data-networking companies, would make an attractive acquisition for a telecommunications company.
A Fore Systems spokesman declined to comment.
An analyst with an investment management firm said the rumored takeover could be initiated by a European telecommunications company. He said that Nokia Corp. (NOKA) and Sweden's Ericsson Telephone Co. (ERICY) are among the companies that would find Fore's packet-switching technology attractive.
In the past, others have suggested that Japan's NEC Corp. (NIPNY) and Fujistu Ltd., both of which need to shore up their positions in data networking, might want to buy Fore.
As the ability to transmit data becomes increasingly important for telecommunications companies, those that do not have data-networking assets are expected to craft acquisition strategies to get them. The most recent evidence of the drive among telecommunications companies to acquire data-networking assets came earlier this month when Germany's Siemens AG bought Castle Networks Inc. and Argon Networks Inc,, two start-up data-networking companies.
That move came in the wake of Alcatel Alsthom's (ALA) announcement that it would buy Xylan Corp. (XYLN), and Lucent Technologies' (LU) planned purchase of Ascend Communications Inc. (ASND). Northern Telecom (NT) bought Bay Networks last year.
Fore's strength in a special kind of packet-switching technology - called asynchronous transfer mode, or ATM, and used to transmit data over the Internet - is coveted by telecommunications companies. Its technology, in combination with a market value that is said to be well below its worth, has played no small part in the speculation up and down Wall Street that Fore will not remain independent for long.
Friday, NationsBanc Montgomery Securities analyst Al Tobia issued a report in which he called the company an "attractive acquisition candidate." He said the company's private market value is about $30 a share, which is above the stock's 52-week high of 28 set back in July. More recently, the stock has been trading in the mid- to upper-teens.
Options traders are looking for the kind of boost to Fore's stock that is associated with a takeover bid. They are paying top dollar for Fore April 20 and 22 1/2 calls. These contracts would increase in value if Fore stock traded above 20 and 22 1/2, respectively. The April 20 call was recently up 5/8 at 1 15/16 on composite volume of 3,089 contracts, compared with open interest of 5,740. The April 22 1/2 call was up 3/8 at 1 1/4, on composite volume of 2,328, compared with open interest of 1,724.
Fore's options were the 10th-most actively traded contracts at the Chicago Board Options Exchange Monday.
While the rumors have energized trading in Fore's stock and options, some observers are urging caution, noting that the company has been pegged as a takeover candidate for quite some time and the company is still independent. "None of this is anything new or different," said Nutmeg Securities analyst Andy Schopick.
- Nancy Beiles; 201-938-5267
Steven M. Sears contributed to this report.
My 2 cents: FORE will never take less than 50, a price no one is willing to pay. |
