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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: zbyslaw owczarczyk who wrote (11973)	6/22/1999 10:51:00 PM
From: Ian@SI	Read Replies (2) \| Respond to of 18016

One good story deserves another... June 22, 1999 Newbridge Attracted To Stanford's Technology Lead TORONTO -- Newbridge Networks Corp.'s (NN) move to expand its broadband wireless operations through the planned acquisition of Stanford Telecommunications Inc. (STII) appears expensive. As reported, Newbridge, Kanata, Ont., is acquiring Stanford Telecommunications, Sunnyvale, Calif., in a stock-for-stock exchange, but it will retain only Stanford's wireless broadband products group. Stanford is required to sell its other operations under the pact. Newbridge, a networking equipment vendor, figures it will end up paying net $280 million, after dispositions. Assuming this figure is correct, the price seems expensive, since Standford's broadband wireless business currently represents less than 10% of the company's annual revenue, which was $165.4 million for its fiscal 1999 period, which ended March 31. Newbridge chief financial officer Ken Wigglesworth defended the price by noting that Stanford is "at the front end" of the industry in the development and sale of broadband wireless technology, including modems and network interface equipment. "We estimate (Standford's) lead time to be a least 12 months," commented Newbridge spokesman Paul Goyette. Stanford's broadband wireless technology, which is already used in Newbridge's switching equipment, allows telecommunications carriers to improve customer access to their networks. The high growth of data traffic is creating bottlenecks at the edge of networks where customers send or receive information, so the demand for technology that alleivates this congestion is growing, Wigglesworth said. Wigglesworth said Newbridge's existing wireless broadband business has booked $1 billion worth of business over the next three years. Newbridge Network Corp. (NN) calculates the estimated $210 million it will pay for Stanford Telecommunications Inc. (STII) as follows: Initially, Newbridge expects to pay the equivalent of about $490 million for all of Stanford. But then Newbridge will apply the proceeds raised from the sale of assets by Stanford - an estimated $210 million - against the initial outlay to end up with a price of around $280 million. Ken Wigglesworth, Newbridge's chief financial officer, said the $210 million Stanford is expected to raise from asset sales is based on bids already received for these assets by Stanford. Newbridge's two major competitors in the wireless broadband arena are Nortel Networks Corp. (NN) and Cisco Systems Inc. (CSCO). Wigglesworth said the acquisition of Stanford will help it compete against these rivals by giving it complete access to Stanford engineers, and allowing it to boost the profit margins earned on the sale of broadband wireless equipment. Even though Stanford is currently a Newbridge supplier, Stanford also had obligations to its other customers, which limited Newbridge's influence over Stanford's operations and the cost of production, Wigglesworth explained.

To: zbyslaw owczarczyk who wrote (11973)	6/23/1999 6:54:00 AM
From: Glenn McDougall	Respond to of 18016

Newbridge buying U.S. telecom firm Acquisition of Stanford will cement presence in emerging market for high-speed wireless networks LAWRENCE SURTEES Telecommunications Reporter; Globe and Mail With files from Bloomberg News Wednesday, June 23, 1999 Newbridge Networks Corp. is buying Stanford Telecommunications Inc. for $490-million (U.S.) in stock to cement its presence in the emerging market for high-speed wireless networks. The deal hinges on Stanford finding buyers for its defence and satellite ground station businesses, which Newbridge doesn't want. In addition to Stanford's wireless broadband group, Newbridge will keep its telecommunications components and personal communications satellite groups. Newbridge expects the final bill for its acquisition to be only $280-million after the $210-million it estimates it will get from the Stanford's sale of the other businesses. With Stanford, Newbridge nabs leading-edge technology that will round out its own product offering in the wireless area, giving it a crucial edge with customers looking for one-stop shopping. The head of Stanford said the merger of the two firms will be relatively painless because of the two firms' 18-month-old alliance. "Newbridge knows the Stanford Telecom team -- the people, the culture and the technology -- and Stanford Telecom knows the Newbridge team," said Val Peline, president, chief executive officer and founder of Stanford. The parties expect to close the transaction by November. Newbridge, based in Kanata, Ont., designs and makes switching equipment for high-speed communication networks. After a failed acquisition three years ago, Newbridge diversified into making gear for new wireless networks. Those networks use radio waves to send and receive large amounts of information to potential customers. There are two high-speed wireless networks: LMCS -- for local multipoint communication services, aimed at data and Internet users; and MMDS -- multichannel multipoint distribution service, which is aimed at carrying video signals and is also called "wireless cable." Newbridge has worked with Stanford for the past 18 months and has integrated its technology into Newbridge's wireless broadband equipment, said Alan Lutz, president and chief operating officer of Newbridge. Stanford, founded in 1973, had profit of $1.3-million and revenue of $165-million in its last fiscal year ended March 31. It employs over 1,000 people. At least one industry watcher applauded the deal. "This is something [Newbridge] needed to get into," said Maribel Lopez, an analyst at Forrester Research Inc. of Cambridge, Mass. Newbridge's wireless development team, to be based in Sunnyvale, will develop modems and subscriber units for wireless broadband networks. The company hopes the acquisition will strengthen its position in the broadband wireless market, Mr. Lutz said. He added Newbridge has won contracts to install 15 such systems around the world and has been selected for 13 additional field trials. Newbridge will acquire the 13 million shares outstanding of Stanford in a tax-free, stock swap. Stanford's shares traded at $26.50 before a trading halt late yesterday afternoon, giving the high-tech company a market value of $344.5-million. Newbridge shares fell 80 cents (Canadian) to $45 on the TSE yesterday before being halted. But the shares rose $4.55 to close at $45.80 on Monday. Under the agreement with Newbridge, Stanford shareholders will receive $30 (U.S.) worth of Newbridge stock for each Stanford share they own, plus a contingent value right (CVR) that will give them a participation in the proceeds on the sale of other operations above a minimum amount. It will also be payable in Newbridge shares and each CVR may have a value of up to $5 a share. Newbridge said the deal has a provision for a breakup fee "within normal standards," but did not specify the amount of the fee. The value of a Newbridge common share shall equal the 10-day average closing price on the New York Stock Exchange, ending on the fifth trading day immediately preceding Stanford's stockholder vote, expected in October. If Newbridge's stock price is below $24 and Newbridge does not exercise its right to adjust the exchange ratio, Stanford's board will be permitted to terminate the agreement. In addition to being subject to the approval of Stanford's stockholders, the transaction is conditional on the execution of a definitive agreement for the sale of the other operations, receipt of regulatory approvals and other customary closing conditions. The transaction will be accounted for under the purchase method of accounting. Mr. Lutz said he expects the acquisition will be break-even in the first year. Newbridge has more than 20 affiliates and alliance partners, including 3Com and Siemens AG. NEWBRIDGE NETWORKS Head office: Toronto CEO: Terence Matthews TSE symbol: NNC Activities: Designs, manufactures and services a family of networking products and systems that delivers the power of multimedia communications to organizations in more than 100 countries. 1998 revenue: $1.6-billion 1998 profit: $-$18.3-million STANFORD TELECOMMUNICATIONS Head office: Sunnyvale, Ca. CEO: Val Peline Nasdaq symbol: STB Activities: Manufactures and markets advanced digital communications products and systems to establish or enhance communications via satellites, terrestrial wireless and cable. 1998 revenue: $165-million (U.S.) 1998 profit: $1.3-million (U.S.)