Investors give JDS Fitel,
Newbridge wild ride on market
Takeover rumours, positive results fuel
speculation
Bert Hill
The Ottawa Citizen
Newbridge Networks and JDS Fitel stock prices took huge swings
yesterday in response to new takeover rumours and choppy market
conditions.
Newbridge stock jumped $8, or 16 per cent, in 90 minutes of frantic
afternoon trading yesterday on fresh rumours that the company could be
the target of a takeover.
The stock eventually settled up $2.85, or six per cent, closing at $52.80,
its highest level in 10 weeks.
As one of the last smaller players in a rapidly consolidating networking
industry, Newbridge has been singled out repeatedly as a potential
takeover target.
In the past year, rivel Nortel Networks Corp. has taken over Bay
Networks and Lucent Technologies is buying Ascend Communication.
Most recent Newbridge speculation has focused on Siemens, the giant
German telecommunications company that has a partnership with the
Kanata company.
Yesterday's rumour brought forward some fresh names, including
Ericsson, the Swedish giant, and Tellabs Inc of Lisle, Illinois, as possible
suitors.
However, analysts said there was no hard information to support either
rumor. And Newbridge spokesman Paul Goyette said there was no
news from the company to explain the sudden price increase.
James Kedersha, an analyst with S.G. Cowen Securities of New York,
said Tellabs probably triggered buying interest in Newbridge after it
released record earnings results on Wednesday and told analysts it is
looking for acquisitions.
Tellabs makes equipment that increases the reliability of long-distance
and local telephone service. It has been moving into the data networking
equipment market, which is exploding as a result of the growth of the
Internet.
"It is easy to see why the market reacted because really there are only
two likely networking targets left for Tellabs: Newbridge and Fore
Systems," Mr. Kedersha said.
JDS Fitel stock was caught in choppy market conditions that drove
down the price of many telecommunications and networking companies
early in the day.
Analysts said that investors were taking profits after months of big price
increases and moving some profits into depressed stocks such as
cyclical companies.
But JDS Fitel had just the day before released record new quarterly
results which exceeded analyst predictions by 22 per cent.
At the start of trading JDS Fitel stock rose to hit $100 in response to the
good news but then started to tumble as big institutional investors sold
stock in order to lock in profits.
In the space of 30 minutes, the stock plunged 25 per cent to a low of
$75.
"It was really wild," said analyst Emil Savov of Goepel McDermid of
Vancouver "because most of the selling took place during an analyst call
with JDS management.
"It (the call) was all very optimistic and upbeat with no news to explain
what was happening in the market."
Some observers speculated that JDS stock was hit because its planned
merger partner, Uniphase Corp. of California, lost a contract to a
competitor.
And E-TECK Dynamics, a company that competes with JDS, also
reported strong results that appeared to suggest it was closing ground.
But Mr. Savov said that closer examinations showed that JDS and
Uniphase are still undisputed leaders in their respective sectors of the
booming fibre-optics market.
Still, the sudden fall temporarily slashed $2 billion in value from the the
company's market capitalization.
However, the correction was short-lived because JDS stock climbed
back to close at $94.60, a decline of $1.65, or less than two per cent,
on the day.
It was a measure of how quickly JDS stock has risen in recent weeks
that the $75 low early in the day matched the shares' high price of just
three weeks ago. |
