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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Tunica Albuginea who wrote (1264)	2/24/2000 3:13:00 AM
From: Tunica Albuginea	Read Replies (1) \| Respond to of 3891

2/24:ÿWALL STREET JOUR:ÿÿÿ Alcatel to Acquire Newbridge Networks ÿÿÿÿÿÿÿÿÿÿÿ February 24, 2000 ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel to Acquire Newbridge Networks ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In $7.1 Billion Deal, Broadens Offerings ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By KEVIN J. DELANEY ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Staff Reporter of THE WALL STREET JOURNAL ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ PARIS -- Alcatel SA of France added new momentum to ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ its push into data networking Wednesday with the ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ announcement of its planned $7.1 billion (7.07 billion ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ euros) acquisition of Newbridge Networks Corp. of ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Canada. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The deal between the two ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ telecommunications-equipment makers, which was ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ widely anticipated, broadens Alcatel's high-speed ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet technology offerings, bolstering its efforts to ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ keep pace with powerhouse rivals like Nortel Networks ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Corp. and Cisco Systems Inc. Newbridge builds ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ switches that allow voice, video and data to travel over ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ networks at high speeds. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ "We now feel we have pretty much ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ everything we need in terms of ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ next-generation networks," said ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Krish Prabhu, chief operating ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ office of the French company's ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel Telecom business. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Under the terms of the merger ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ approved by both company's ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ boards, Newbridge shareholders ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ will get 0.81 of an Alcatel American depositary share ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for each of their own shares, a premium of 11% based ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ on Tuesday's closing stock prices. To finance the deal, ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel would issue new shares equivalent to 17.6% of ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ its current capital, increasing the company's theoretical ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ market value to around 54 billion euros. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Analysts said the price, which was equal to roughly 3.5 ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ times Newbridge's sales, was lower than comparable ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ recent transactions, largely because of the Canadian ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ company's rocky performance over the past two years. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Speculation Ends ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The deal ends speculation that began in November when ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge said it would put itself up for sale after ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ failing to meet analyst expectations in six of 10 quarters ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and enduring several management changes. The company ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ hired Morgan Stanley Dean Witter & Co. to help it find a ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ suitor, and in late November said it was laying off 10% ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of its work force, or about 600 employees. Alcatel was ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ represented by Credit Suisse First Boston in the ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ transaction announced Wednesday. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge separately announced record sales for its ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fiscal third quarter Wednesday, but a big loss after ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ extraordinary items. The company reported per-share ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ earnings of 13 cents a diluted share, before extraordinary ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ items and charges. A First Call Thomson Financial ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ survey had set analysts' consensus earnings estimate at ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 11 cents a diluted share. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Stock Slips ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In 4 p.m. trading Wednesday on the New York Stock ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Exchange, Newbridge shares were trading down $1.50, ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ or 4.4% to $32.875. Alcatel's American depositary ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ shares traded at $43, down 9.9% or $4.75, on the Big ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Board. The shares had fallen 8.6% in Paris. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Some analysts were guarded about enthusiasm for the ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ deal citing concern that Newbridge's troubles would ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ persist. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The acquisition helps fill a gap in Alcatel's ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ asynchronous transfer mode, or ATM, technology ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ products. Company executives said the ATM switches, ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ packaged with Alcatel's high-speed access offerings and ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge's network management products will enable ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ it to provide one-stop shopping for network carriers. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ATM enables switching between voice and data ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ transmission and is expected to be used for the next five ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to 10 years before being replaced by Internet Protocol ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ technology for combined voice and data. The companies ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ said Alcatel's broader sales network and financial might ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bolster sales of Newbridge's products. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Alcatel said the acquisition would result in an annual ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ $230 million in cost savings for the two companies by ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 2002, and should boost the French company's operating ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ income by an estimated $160 million this year. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Newbridge will merge with Alcatel's Carrier Data ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Division to form the new Carrier Internetworking ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Division, headquartered in Canada. The move will ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ increase Alcatel's expected sales in this division to $2.5 ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ billion from $1 billion. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Wednesday's announcement is the biggest in a technology ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ buying spree by the French company that began with its ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 1998 purchase of DSC, a U.S. maker of telecom ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ equipment, for $4 billion. Since then, Alcatel has bought ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ a handful of U.S. firms with data-networking expertise. ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In the wake of these deals, the U.S. is the company's ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ biggest market, contributing more than 20% of sales. Just ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ a few years ago, Alcatel sold most of its products in ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ France.