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


To: zbyslaw owczarczyk who wrote (17333)2/19/2000 1:19:00 PM
From: zbyslaw owczarczyk  Respond to of 18016
 
Frontrunner Alcatel only firm given access to crown jewels

by James Bagnall, Ottawa Citizen, Saturday, February 19, 2000

Share prices at Alcatel S.A. of France and Newbridge Networks Corp. of Kanata fell more than seven per cent yesterday -- more than twice
the decline in the broader market -- as investors reacted to the prospect the two telecommunications equipment firms would soon be joined
at the hip.
It's not clear what, if any, impact, adverse market reaction will have on talks at the highest levels between the two firms. But it's unlikely to
sway Alcatel from its intense interest in acquiring the Kanata company.
Alcatel, long the frontrunner among potential buyers of Newbridge, is the only firm that has been permitted to examine the Kanata firm's
core product lines in great detail. Alcatel managers have done extensive due diligence on Newbridge's network-management products --
known as the 4602 and 4800. These are considered the firm's crown jewels because they are the brains of the voice-and-data networks that
are Newbridge's specialty. Alcatel engineers ahve also been poring over the detailed specifications for Newbridge's new
50-gigabit-per-second asynchronous transfer mode switch, a next-generation device expected to drive up Newbridge's sales significantly.
While Alcatel's managers have been combing Newbridge's operations, New York investment banker Morgan Stanley Dean Witter has been
trying to drive up the purchase price to a level acceptable to Newbridge chairman and founder Terence Matthews, who still owns 22 per
cent of the firm. Mr. Matthews is expected to resist any offer that would net him less than $40 U.S. per share, or $7.1 billion U.S.
Analysts believe Alcatel might be ready to pay $7 billion to $8 billion U.S., at least a 19 per cent premium over Newbridge's closing price
yesterday of $32 3/4 in New York.
Newbridge's share price fell yesterday at least in part because a report in The Wall Street Journal suggested Alcatel was in negotiations
over a deal worth "more than $6.5 billion U.S. n stock." "People were expecting a number closer to $8 billion U.S.," said Patrick
Houghton, an analyst with Sutro & Co. of California. "But it's in Alcatel's interest to try to lower the price going into final negotiations."
A deal could come as early as Tuesday, when Newbridge is to unveil its third-quarter results. However, analysts were told yesterday by
company officials that this is unlikely. An announcement might be delayed a week or so, depending on how talks go.
Analysts have also been advised that more than one firm is still in the running. But this could simply mean others have been asked to
submit a final bid by a certain date. Everything inside Newbridge points to Alcatel.
Three things might change that -- a richer bid from an Alcatel competitor, a long run on Alcatel shares by nervous investors, or a change of
heart by Mr. Matthews. None seems likely.



To: zbyslaw owczarczyk who wrote (17333)2/19/2000 4:14:00 PM
From: Bob Howarth  Respond to of 18016
 
From WSY.com:

"The phone companies have known for a long time about the DSL-fiber clash. Still, it's difficult to see how they could have avoided the current predicament. Fiber-optic lines, with almost unlimited capacity, have been indispensable in enabling the Bell networks to handle millions of new cellular phones, fax machines and second telephone lines. The fiber lines also are easier and cheaper to maintain. But competition forced the Bells' hands. When cable companies jumped in with aggressive high-speed offerings, the Bells' dusted off DSL, a 15-year-old technology that had been sitting on the shelf for years, and hastily repackaged it as a new technology that would light a fire under consumers.

Right now, getting DSL can be an enormous headache. It can be downright impossible in many new communities that the Bell companies have wired with fiber lines. Even senior Bell execs haven't been able to get around the problem. Sol Trujillo, chairman of U S West Inc., the Denver Bell, discovered last year that he wasn't eligible for DSL in his new Cherry Hills home because the neighborhood was served by fiber lines.

The remedy? U S West ran a monster T-1 line, the kind of data line favored by big businesses, to the chairman's newly constructed home. To this day, he still can't get DSL.

"None of us has a solution to get DSL to the end" of the fiber lines, says Amy McIntosh, president and chief executive of Bell Atlantic Corp.'s data unit. Still, Ms. McIntosh says, she is confident the problem will be solved soon. "I'll take our hand of cards versus the cable companies' any day."

Even when it has copper lines to run on, DSL has other quirks. Network experts say the DSL lines shouldn't be located with other data lines in the same "sheaths," the big bundles that are buried in the ground. That's because DSL lines can pick up electronic interference from other lines, and also create it.

Before installing DSL, the Bells typically dispatch a crew to check sheaths for the presence of other data lines and remove or relocate them if necessary. These service calls, called "truck rolls," are expensive, and most Bells try to avoid them.

Then there is the distance problem. Currently, the farthest a DSL signal can travel without degradation is about 15,000 feet, or a little less than three miles. That means people have to live within 15,000 feet of a Bell central office, where DSL signals originate, to be eligible for the service. But even then, if you have fiber lines you are out of luck. U S West's Mr. Trujillo, for example, lives only 9,600 feet from a central office.

There are other problems, depending on how the local network is laid out. Some lines snake around underground so much they can easily eat up 15,000 feet long before they reach houses that would seem to meet the DSL distance requirement.

DSL performance also can be affected by such things as the thickness of the copper wire it is riding on. Thin wires don't handle DSL as well as thick ones, which are pricier. The problem is, some Bells, aiming to cut down on costs, have deployed miles upon miles of thinner-gauge copper over the years. As a result, customers who live in those areas may have to make do with slower DSL connections for a long time. The Bells could just replace the lines with thicker copper wiring, of course, but that would be expensive.

And then there are the obstacles many consumers have created inadvertently for themselves, by doing their own "inside wiring." For more than a decade, customers have been permitted to attend to the telephone wiring inside their homes. The all-too-predictable result in many homes is a mish-mash of wiring schemes, many of which aren't compatible with DSL either.

John Goldman, a spokesman for BellSouth Corp., says DSL installers sometimes have to make several trips to clean up the mess. "It can be a real nightmare," he says.

Clearing the hurdles won't be cheap. SBC Communications Inc., the big San Antonio Bell, recently committed $6 billion to overhaul its network to better accommodate DSL. As part of the effort, SBC says, it is working with manufacturers to come up with solutions to DSL's problems.

One consequence of the DSL-fiber clash is that Bells with the highest-quality networks are among the least prepared to offer DSL. Because of aggressive upgrading over the years, Bell Atlantic and BellSouth have top-notch networks that are crammed with new fiber lines. Both acknowledge the issue and say they are working with vendors to come up with answers.

Equipment makers have been working for years to resolve the problems. Alcatel, the French telecom-gear manufacturer, is currently in field trials with a "remote terminal," a kind of adapter that is supposed to let DSL and fiber interconnect. Once installed in neighborhoods, the remote terminals would act as mini "central offices," extending the reach of DSL while creating a path for fiber users.

More than four years in the making, the remote units, crammed with miniaturized components, have their own battery backup power -- necessary in the event of a power outage, because they are powered by local utilities. They range in price from about $1,000 to more than $50,000 and can handle 24 to 2,000 lines each. The smallest is the size of a big ice cooler; the biggest, the size of a small Volkswagen bus.

Alcatel Vice President Paul Segre says a commercial-grade model should be available in about six weeks. SBC, anxious to push ahead, began using test units in January and says they work fine. Bell Atlantic, another customer, won't deploy the terminals until field tests are finished around midyear, Bell Atlantic figures."