More press releases, the first from Dow Jones, written before the acquisition announcements, all somewhat overlapping:
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August 25, 1999
Dow Jones Newswires
Newbridge Seen Buying IP Company Wednesday: Source
By Ben Dummett
TORONTO -- Newbridge Networks Corp. (NN) is expected to announce on Wednesday the acquisition of an Internet-based equipment vendor, as part of its long-awaited strategy to service the explosive growth of data traffic over the Internet, an industry source said.
The source wouldn't disclose the identity of the target company. However, Newbridge, Kanata, Ont., has long maintained that it wanted to get closer to its Internet-based affiliates in the Boston, including Northchurch Communications Inc., which makes superfast routers that work at the edge of Internet-based networks.
Newbridge owns about 60% of Northchurch.
Newbridge officials weren't immediately available for comment.
Officials at Northchurch Communications Inc. weren't immediately available for comment.
Newbridge Networks Corp., which is mainly known as a manufacturer of asynchronous transfer mode, or (ATM) network equipment, also owns a controlling stake in another Boston area company called Ironbridge Networks Inc.. Ironbridge makes high-speed routers that work in the core of an Internet-based network.
However, Ironbridge told Dow Jones last week it expected Newbridge's controlling stake in Ironbridge to drop to a minority position by the end of this year, assuming that Ironbridge completes its plan to raise up to $50 million in private financing.
Newbridge's expected acquisition later Wednesday doesn't come as a surprise since the networking equipment vendor has publicly stated that it would clarify its Internet-based strategy on two occasions by Sept. 23.
If the acquisition is announced later Wednesday, it would come a day after Newbridge reported slightly better-than-expected earnings for the fiscal first quarter. The company posted net of 18 cents a share, above the First Call mean estimate of 16 cents.
However, as a testament to the importance of Newbridge clarifying its Internet-based strategy, analysts reacted cautiously to Newbridge's latest numbers.
In a research note published Wednesday morning, RBC Securities Inc. said Newbridge is still mainly an ATM company, even though the market is becoming increasingly more Internet based. The note then goes on to say that, "barring some dramatic new product initiatives," RBC is maintaining its neutral rating on the stock.
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August 25, 1999
Dow Jones Newswires
Newbridge Confirms Plans To Buy TimeStep, Northchurch
KANATA, Ont. -- Newbridge Networks Corp. (NN) said it plans to acquire TimeStep Corp. and Northchurch Communications Inc. for a total of about C$350 million.
In a news release, the company said the purchase price is payable in cash over two years. The acquisition cost includes projected performance payments, it noted.
Newbridge said it now holds about a 30% stake in each of these companies.
It said the acquisitions will combine "industry-leading" IPSec from TimeStep, Kanata, Ont., and "innovative" IP edge routers from Northchurch, Andover, Mass.
It said the move expands the addressable market and greatly enhances Newbridge's ability to deliver Internet protocol, or IP, service solutions.
Newbridge said that, with the commoditization of Internet connection services, carriers "are eager for innovative technology to help them launch new, revenue-generating business and residential IP services." It said TimeStep's IPSec technology, embedded into the Newbridge enhanced IP platforms, provides a "critical element" in building secure IP-VPN solutions. The Northchurch edge service router, a next-generation programmable platform, integrated into Newbridge's rich service management suite of products, enables the creation of personalized IP services, further enhancing the intelligence of the edge router.
Newbridge said a takeover bid circular in connection with the TimeStep acquisition will be mailed to TimeStep shareholders shortly. The acquisition has been approved by Newbridge's board and is subject to various closing conditions. It said TimeStep's board has also agreed to support the acquisition.
The acquisition of Northchurch is expected to close over the next week, it added.
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August 25, 1999
Dow Jones Newswires
Newbridge Acquisitions Aimed At Internet Svc Providers
By BEN DUMMETT
TORONTO -- Newbridge Networks Corp.'s (NN) plan to acquire outright two of its affiliates, TimeStep Corp. and Northchurch Communications Inc., for C$350 million is part of its strategy to help Internet Service providers, or ISPs, create virtual private networks for customers.
Virtual private networks allow ISPs to offer corporate clients on-demand access to Internet-based technology that enables these clients to connect their offices in order to send data and do videoconferencing. This way, businesses can avoid the upfront costs of installing permanent high-speed networks, which they might only use perodically.
To meet the needs of the ISPs for Internet-based virtual private networks, Newbridge needs to offer high-speed routers that allow the ISPs to connect customers to a virtual private network - gear that Newbridge gets through Northchurch, a Boston-area start-up.
From TimeStep, Kanata, Ont., Newbridge gets access to technology that allows the ISPs to ensure their virtual private networks are secure from intruders.
"We're not trying to do the same thing that everybody else is doing," Newbridge president and chief operating officer Alan Lutz said. The executive was referring to the competition's focus on supplying high-speed routers that work in the core of IP-based networks, as opposed to Northchurch's routers, which work at the point where the main network connects with a company's internal network.
Newbridge will rely on its main product line of high-speed asynchronous transfer mode, or ATM, switches to service the core part of Internet-based networks. Lutz noted that "virtually all IP networks have ATM" in the core or backbone of the network to ensure voice quality.
Moreover, Lutz said, ISPs historically haven't been able to charge users any more money by just adding switching capacity at the core with routers.
An analyst, who asked not to be identified, suggested that Newbridge Networks Corp.'s (NN) decision to acquire the rest of Northchurch Communications Inc. is evidence of a weakening relationship between Newbridge and Germany's Siemens AG (G.SIE).
The analyst suggested that Newbridge made its move after it couldn't reach a development deal with Unisphere Solutions Inc., a company formed by Siemens, which also makes edge routers.
However, Alan Lutz, Newbridge's president and chief operating officer, said Newbridge chose not to work with Unisphere because it is focused on a different customer base.
Still, Newbridge told analysts Tuesday that its relationship with Siemens no longer involves product development and instead is limited to an equipment distribution pact.
Meanwhile, Newbridge's decision against focusing on developing routers for the core of a network is further evidence that its ties with Ironbridge Networks Inc., another Boston-area affiliate, will loosen, since Ironbridge makes high-speed routers for the backbone of a network.
Newbridge directly and indirectly owns 60% of Ironbridge. However, last week, Ironbridge said it sees Newbridge's stake falling to a minority position after it raises an expected US$50 million from private financings by the end of the year.
At a cost total cost of C$350 million, Newbridge's acquisitions of TimeStep and Northchurch seem rich. Northchurch so far has no sales. TimeStep generates revenue, but Lutz declined to provide specifics.
Lutz defended the acquisitions because of their strategic importance. They represent the initial unveiling of the company's Internet-based strategy and "the start of (Newbridge) building significant resources" in this area, Lutz said.
Indeed, the market has been waiting months for Newbridge to shed light on its Internet-based strategy. In addition to Wednesday's announcement, Lutz also said "there is more to come," but declined further comment. Most investors expect an additional announcement Sept. 23.
As reported, Newbridge currently owns about 30% of each of TimeStep and Northchurch. However, it indirectly controls about another 30% in each affiliate through the private investment arm of Newbridge's founder and chief executive, Terry Matthews.
That means that Matthews would appear poised to reap a significant portion of the total C$350 million Newbridge is paying.
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Newbridge Says Acquisitions To Dilute FY2000 Earnings
TORONTO -- Newbridge Networks Corp. (NN) said its planned acquisition of affiliates Northchurch Communications Inc. and TimeStep Corp. will reduce operating earnings for the fiscal year ending April 30, 2000 by 6 U.S. cents a share.
According to First Call, Newbridge is expected to post operating earnings of 95 U.S. cents a share in fiscal 2000. In a conference call with analysts, Newbridge executives said the expected dilution isn't already reflected in the First Call estimate.
On the same call, Newbridge executives said the acquisitions will be earnings-neutral in fiscal 2001 and then boost earnings in following years.
Newbridge also said that TimeStep is generating revenue of C$5 million to C$10 million a quarter. However, it expects this amount, on an annualized basis, to double year-over-year.
Northchurch is expected to start generating revenue at the end of this year, or early next year, once it begins shipments of its products, the executives said.
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