Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (29801)	11/23/1999 9:30:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

David vs. Goliath: Newbridge Networks? Exit Strategy Tell us what you think in NN's Board. TODAY I. I. A N A L Y S I S Medical Advisory Systems & NAPCO Security Systems DID YOU MISS A DAY? Last 7 Days Archived -------------------------------------------------------------------------------- individualinvestor.com By Dave Sterman, Director of Online Research (11/22/99) Terry Matthews has seen enough. The Chairman and founder of Newbridge Networks (NYSE: NN - Quotes, News, Boards) has seen his 22% stake in the company dwindle in value from $2.85 billion to just $700 million. He has now asked bankers to find someone, anyone, to take his company of his hands. Like this Article? He has no other choice. His decision to bring in Stan Lutz to run the company last year turned out to be a big mistake. Not only did Lutz fail to boost the top line, but he also cleared the old ranks of management, many who served under Matthews in prior years. But Lutz is now gone and Newbridge?s management team is about as deep as the Seattle Mariners bullpen. That has led many to conclude that Newbridge simply can?t compete as a standalone company. In conjunction with Thursday?s announcement that Newbridge earned just $0.08 in its fiscal second quarter, Matthews said that he?s ready to sell his company. Rumors of just such an announcement sent the shares up sharply a few days earlier. But investors waiting on a deal shouldn?t hold their breath. Their faces will turn blue. Matthews knows that Newbridge could become much more attractive within a few months, thanks to the launch of a several key products that could put the company back on the map. And that 22% stake is quite an incentive to get the best possible price for the company. Currently, Newbridge is in the throes of a painful product transition. Its existing line of ATM switches are no match for the State-of-the-Art wares sold by Lucent Technologies (NYSE: LU - Quotes, News, Boards). As a result, Newbridge?s North American sales have been stuck in neutral for the last two years. Roughly 80% of Newbridge?s sales are to the traditional long-distance carriers. And though U.S. carriers have reduced the interest in Newbridge?s products, European carriers are quite enamored of Newbridge?s switches. European sales rose 38% in the second quarter, compared to a year earlier. A strong relationship with Siemens (NASDAQ: SMAWY - Quotes, News, Boards) has bolstered the company?s profile on the continent. In fact, Siemens accounts for almost 20% of Newbridge?s sales. Sales, both here and in Europe, could get a strong boost in the spring when Newbridge unveils a pair of new, faster switches. The first one, will transmit data at 50 Gigabits per second. The second, a 350 Gps switch would leapfrog any currently available switches. Those switches will also incorporate scads of Internet- related software features. Long-distance carriers are quickly upgrading to ensure that their networks are fully integrated with the Internet. That should help Newbridge hang onto the number two slot in the $1.5 billion ATM switch market, a market that continues to grow 30% a year, according to ABN Amro. Newbridge?s engineers are also keen on advancing the company?s broadband wireless technology. A recent purchase of Stanford Telecom (NASDAQ: STII - Quotes, News, Boards) should help Newbridge as it rolls out several new products for the wireless niche known as LMDS (Local-to Multi-point distribution). Many feel that re-wiring every home and neighborhood for high-speed Internet access is simply impractical. LMDS is being touted as a clever alternative. In recent weeks, many have speculated that Alcatel (NYSE: ALA - Quotes, News, Boards) or Ericsson (NASDAQ: ERICY - Quotes, News, Boards) might step up to the plate and buy Newbridge. Alcatel has already quashed any rumors, and Ericsson has shown a greater proclivity for smaller companies. Siemens and Tellabs Instead, Siemens and Tellabs (NASDAQ: TLAB - Quotes, News, Boards) are better suited to devour Newbridge. After Nortel Networks (NYSE: NT - Quotes, News, Boards) bought Bay Networks, Lucent bought Ascend Communications, GEC-Marconi bought Fore Systems, and Alcatel bought DSC Communications. Of the large global telecom equipment players, only Siemens is still searching for a dance partner. Since Newbridge already enjoys a strong reputation in Europe, and the two companies product lines are already quite complimentary, a deal makes sense. Here in the states, Newbridge?s emerging wireless products should hold great appeal for Tellabs. After walking away from a potential deal to buy Ciena a while back, Tellabs has been on the prowl for another deal that would help it penetrate new markets. Newbridge?s products make a nice fit. Bottom Line: Over the next few weeks though, shares of Newbridge will likely fall back to around $15 as investors come to realize that any buyout is far from imminent. But by the spring, Newbridge should be ready to throw in a wedding dress; and a march down the aisle could be worth $25-30 a share. The stock closed Friday at $21.50.