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

To: Sans Souci who wrote (2394)	11/5/1997 9:29:00 AM
From: Jeffrey L. Henken	Respond to of 18016

Good find Paul. I'm going to print it here: Wednesday, November 5, 1997 Newbridge shares tumble on earnings alert By JILL VARDY Technology Reporter The Financial Post OTTAWA -- Shares in Newbridge Networks Corp. fell $14.80 -- 18% -- on the Toronto Stock Exchange yesterday after the company issued the second warning in three months that earnings will be lower than expected. The reason was the same as was given when the first-quarter earnings estimate was missed -- sales of business networking products were far below expectations. Shares in New York (NN/NYSE) fell US$915 1/816 to US$485 1/816, while in Toronto the stock (NNC/TSE) ended at $67.20. Newbridge warned late Monday that net income for the second quarter ended Nov. 2 will be within 10% to 15% of the $64.3-million profit reported in the first quarter, ended Aug. 3. Revenue will be about the same as the first quarter's $435 million. That would put it 35% above the $316.1 million in sales reported for the second quarter of 1997. Final results for the quarter will be released Nov. 25. Yesterday's stock drop was exacerbated by a $6.85 jump in Newbridge's stock price in Toronto Monday, after an analyst at J.P. Morgan Securities Inc. upgraded his rating. Peter Charbonneau, Newbridge's president and chief operating officer, said the firm wasn't aware the analyst was releasing a report that day. He said the company's "enterprise networking" business -- equipment used by companies for local area networks -- showed a 25% drop in sales during the past three months. All the shortfall was attributed to weaker than expected sales of products made by Unger Bass Networks, the California networking firm Newbridge bought last year. On Aug. 6 Charbonneau warned a shortfall in the UB product line was expected in the second quarter, but continued strong sales of higher-margin products would cover most of the loss. However, sales of UB's older products, which are being phased out, fell off faster than expected. And strong sales of its VIVID line of switched routers did not materialize. Newbridge is facing an increasingly competitive market for LAN telecommunications products. Charbonneau said it's no surprise sales in the UB product line are dropping -- after all, UB was a reseller for Newbridge rival Cisco Systems Corp. "What hit us harder than we thought was delays in getting our new switched ethernet upgrades in their product line to market. Technical problems have slowed sales that we had anticipated picking up in the latter second and the third quarters." Newbridge warned on Aug. 5 that first-quarter revenue would be down slightly from 1997's fourth quarter. Part of the shortfall has been filled by strong sales of Newbridge's asynchronous transfer mode products for wide area networks. Charbonneau said sales of Newbridge's flagship ATM switches jumped 50% in the second quarter and were five times higher than a year earlier. Analysts like Robert MacLellan of Dillon Read & Co. Inc. say sales of higher-margin items will eventually replace the lost UB product sales. Charbonneau agrees, suggesting the transition will be completed by the company's fourth quarter.