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

To: Ian@SI who wrote (14513)	11/13/1999 8:32:00 AM
From: Glenn McDougall	Read Replies (2) \| Respond to of 18016

Tension mounts in Newbridge boardroom Matthews 'a problem': Company denies takeover talks with European firms Jill Vardy Financial Post OTTAWA - Terence Matthews, chairman of Newbridge Networks Corp., may be at odds with members of his own board over the prospect of the company's takeover by a larger telecommunications equipment company. The board of directors of Newbridge have not considered any takeover offer for the company in the past week. But they've been told to expect one or two for consideration at their regular two-day board meeting next week, say sources close to the board. Those acquisition bids are not welcomed by Mr. Matthews, Newbridge's chairman, founder and single largest shareholder, with 22% of the company's stock, say sources close to the company's senior management. "Definitely Terry is going to be a problem in any kind of takeover," said one insider. "But most of the people on the board are pretty sensitive about their reputations. There is a tremendous sense of responsibility to all the shareholders, not just Terry. And Terry's been told that by the board." Mr. Matthews was not available for comment yesterday. European telecommunication giants Alcatel SA and L.M. Ericsson Telephone Co. Inc. are both rumoured to be mulling bids for Newbridge, whose share value plummeted last week after it warned for the sixth quarter of the last 10 that its earnings and revenues would be lower than expected. The stock rose $2.38 (US) or 13% yesterday to close at $20.63 on the New York Stock Exchange. During the session, the shares rose as high as $23. But John Lawlor, Newbridge's vice- president of corporate communications, flatly denied yesterday that the company is in talks with either of the European giants. "Newbridge is not in talks with either L.M. Ericsson or Alcatel about a possible takeover of Newbridge. In fact, Newbridge is not in talks with any other party regarding a possible takeover of Newbridge," Mr. Lawlor said. He said recent news stories that Ericsson is mounting a bid are "pure speculation." He also denied news reports that senior Newbridge officials have been told to clear their schedules in case there's a major development over the next few days. Lars Ostlund, an Ericsson spokesman, also refused to comment on "individual speculation." "What we've said all along is that we have an acquisition strategy of small to medium-size companies," he told Reuters. Analysts estimate the purchase price of Newbridge would be at least $4.3-billion. Newbridge's board hasn't looked at any formal proposal to buy the company. But it has been told "to look out for some," said an insider, speaking on condition of anonymity. Mr. Lawlor would not say if a takeover offer is expected. He did confirm the board will be asked to evaluate a strategic action plan next week to fix some of Newbridge's production and sales problems. Details of that plan are expected to be made public when the company's second-quarter earnings are announced next Thursday. It would be difficult for any company to mount a takeover without Mr. Matthews' co-operation. He not only holds 22% of the shares but has tremendous loyalty from most of Newbridge's executive and engineering staff. "Any firm interested before in buying Newbridge would be more interested now because the stock price has been cut in half. But all approaches so far have been rebuffed," said Robert MacLellan, technology analyst at CT Securities Inc. Relations between Mr. Matthews and his board may have been strained by the failed tenure of Alan Lutz, who was brought in as president to fix Newbridge's problems in June, 1998. Mr. Lutz was fired last week after a year and a half on the job. One source said: "Terry has less bargaining power with the board than he did a year ago," because it's perceived that he "made a bad decision on Alan Lutz. Terry took his hands off the steering wheel and Alan didn't drive the car very well." Mr. Matthews told the Post on Nov. 2 that he shares the blame for Newbridge's difficulties under Mr. Lutz's presidency. "I think personally I probably stepped back too far" from daily management of the company, he said. The regular board meeting next Wednesday and Thursday is scheduled to approve the company's formal second-quarter earnings release, due out after the close of markets on Nov. 18. But the board has been holding conference calls "almost every day" since Newbridge warned last Tuesday it would report earnings of 8½ to 10½ a share for the quarter, half the amount analysts had expected. Even more ominous for Newbridge-watchers was the fact that sales of Newbridge's flagship telecommunications equipment based on asynchronous transfer mode technology actually fell for the first time in the United States. Newbridge's new president, 36-year-old Pearse Flynn, has said his first priority will be to fix the problems in Newbridge's North American sales division. However, some analysts speculate that sales may be off until Newbridge releases its next-generation high-speed ATM switch in the next month. An even faster switch is due for release early next year. Mr. Lutz did present the Newbridge board with two "scenarios for amalgamating Newbridge with another company" during his tenure. Both were rejected. Neither was considered a formal offer and neither was from Ericsson. While rumours abounded that Ericsson took a run at Newbridge last summer but was rebuffed, Mr. Lawlor said yesterday Ericsson and Newbridge did not discuss any takeover deal last summer. Ericsson management did form close ties with some senior Newbridge officials when the Swedish giant bought Newbridge affiliate Vienna Systems Corp. in September, 1998.