[Background on NN strategy]
I set out to find the article on Terence Matthews I'd read over a year ago and I never found it, but came across some interesting information just the same. The first, from Fortune, indicates carriers prefer working with telecommunications vendors over networkers. Terence Matthews' resume lists the standard info, and the interview with NN's McLeod reveals their early lead in ATM and puts their strategy in perspective. Without damning TDM (says its for the 80s), he focuses on ATM as the way of the future --- and this back in 1994. The rest is peripheral information, concluding with the CEO's and Presidents letters from the 1997 annual report.
Enjoy!
Pat
Fortune article on AT&T gives background on telecommunications vendors versus networkers:
pathfinder.com
Resume of Terence Matthews:
evert.com
Interview with NN's MacLeod with early indications of where co was headed:
cjmag.co.jp
Government partnerships and NN
ei.gov.bc.ca
NN 1997 annual report
ei.gov.bc.ca
A REPORT TO SHAREHOLDERS
from the Chairman and Vice Chairman
Telecommunications networks are on the verge of changes of a magnitude not yet seen in this highly dynamic industry. Ten years ago, service providers and private network operators began deploying networks to handle what now seems like a minor amount of voice and data traffic but at the time was revolutionary. Today, those networks are under pressure to undergo a major overhaul to handle the massive demands of business services.
Newbridge has been laying the groundwork to take advantage of the dramatic changes taking place in the telecommunications industry. Our significant investment in research and development as well as our alliances, affiliations and acquisitions position the Company to move quickly to meet the demands of the marketplace. We are pleased to report that our long term strategy of creating modular, scalable, migratable and manageable networks continues to yield strong financial results.
In fiscal year 1997 sales totaled $1.377 billion with fourth quarter revenues at $441 million. We reported record revenues, order intake and backlog. Net earnings for the year were $254 million (excluding the non-recurring write off of $97 million of purchased research and development in process).
Newbridge has long been the world leader in time division multiplexing (TDM) equipment. Our business in this sector grew about 20% during fiscal 1997. Our share of the market has increased to well over 40%, approximately twice that of our closest competitor.
Newbridge is also established as the world leader in asynchronous transfer mode (ATM) switching equipment. Fast and inherently scalable, ATM is optimized to handle all types of media. There is no doubt that in the next millennium most voice, data, video and multimedia traffic will be carried on ATM-based, broadband, multiservice and multi-application networks. Service providers are already moving to this technology to optimize their existing investments and maintain or enhance their current service offerings.
With more than 170,000 Newbridge networking nodes installed around the world, a unique opportunity exists to provide our customers with a seamless migration path to ATM. This year we delivered circuit emulation and frame relay interfaces on our ATM multiservices platform, creating a powerful narrowband-to-broadband integration capability. Service providers are now able to bridge the gap between current and new generation networks by evolving their private line and frame relay services to an ATM platform, with end-to-end network management.
More than 1,500 engineers from Newbridge and Siemens are working together to develop the next generation ATM-based, broadband multiservices architecture that voice, data, video and multimedia services will run on during the next decade. The alliance agreement between Newbridge and Siemens has been extended to ten years, from the original five.
Newbridge, in conjunction with Siemens, our broadband networking alliance partner, is moving aggressively to capture more of these opportunities. While Newbridge is a recognized leader in data networking, Siemens brings to the alliance considerable expertise in carrier-scale engineering -- including a terabit-class switch. Service providers taking advantage of these combined strengths can move in phases to the ultimate goal of a managed, broadband, ATM-based infrastructure supporting all their service offerings. They can begin by deploying an ATM overlay network for a single, high demand special service such as frame relay, and then migrate to consolidating other special services onto the multiservice platform, eventually establishing ATM at the core with access through complementary technologies including wave division multiplexing (WDM) and SONET.
The recent extension of the alliance agreement to ten years, from the initial five years when it was first announced over a year ago, reinforces the strong strategic relationship Newbridge and Siemens have formed. The jointly developed MainStreetXpressT product family is already being deployed around the world, with announced contracts including Korea Telecom, Telenordia, Tele Danmark, Hong Kong Airport, Bell Canada, Pacific Bell, US WEST, Optus Communications, IXC Communications, Belgacom, and Swiss Telecom.
This year Newbridge began development of wireless broadband access solutions that combine the benefits of wireless, a millimeter wave transmission technology, with ATM. Wireless broadband allows service operators to offer high bandwidth, two-way solutions such as high speed data for the Internet to business and residential customers. Newbridge and Siemens are combining their ATM switching expertise with the broadband access technology of Broadband Networks Inc. (BNI) to develop a family of wireless access products. The wireless solutions also draw on access technologies from Newbridge Affiliate companies -- including hybrid fiber coax (HFC) from West End and dial up access from ACC -- as well as digital subscriber loop (DSL), TDM, ATM and local area network (LAN) access technologies developed in our own labs.
Our vision of end-to-end, seamlessly managed, broadband-based networks extends beyond the wide area network (WAN) to the campus and LAN. The MultiProtocol Over ATM (MPOA) standard and switched routing architecture upon which our VIVIDr solution is based makes integration of the LAN and WAN possible. The VIVID solution allows corporate customers to migrate from their legacy router installed base, reduce costs, control quality of service and scale readily to accommodate growth. For service providers, the ability of the VIVID system to integrate seamlessly with the WAN offers an opportunity to introduce new services in the LAN data market.
Comprehensive network and services management capabilities are key to the Newbridge vision of a single broadband-based network infrastructure supporting services of all kinds. The Newbridge management framework is an open platform that encompasses all Newbridge products and integrates third-party elements and management systems. Our commitment to open systems was further demonstrated this year in successful network management interoperability tests with TeMIP from Digital Equipment Corporation and the Bull ISM platform.
Newbridge is responding to the unprecedented growth of the Internet and the emergence of corporate intranets with solutions that include a high performance, managed IP (Internet Protocol) services infrastructure based on ATM. Service providers will be able to differentiate their offerings with end-to-end guaranteed quality of service and managed virtual private network services including intranets. They will also be able to assign billable, guaranteed levels of service for different customer and application classes. For corporate network operators, Newbridge is leveraging the campus LAN expertise of the VIVID group, Newbridge subsidiary ACC, and especially the newly acquired UB Networks to develop an IP access solution that uses MPOA to integrate with core WAN technologies.
Several management changes took place in fiscal 1997. Peter Sommerer became Vice Chairman of Newbridge with increased responsibility for relationships between Newbridge and its Affiliates. Peter Charbonneau moved into the role of President and Chief Operating Officer. Ken Wigglesworth, formerly Vice President, Finance became Chief Financial Officer.
Industry consultants have identified the five fastest growing technology sectors: ATM, frame relay, LAN switching, remote access systems and gigabit routing. Newbridge is solidly positioned with strong products that address each of these sectors.
Looking ahead, we believe the telecommunications industry holds exceptional promise for continued robust growth. Newbridge is one of the most entrepreneurial companies in the industry. Our employees are dedicated, talented, and highly motivated. Our business strategies are highly focused and our networking solutions are based on world-class architectures and products. Our customer base covers the globe and includes the world's leading service providers and innovative organizations from every industry. We are well positioned to strengthen our leadership position and take advantage of the revolutionary changes taking place in our industry as we move to the new millennium.
THE PRESIDENT'S REPORT
The Company's focus on operational efficiency and control continued to yield solid operating results for fiscal 1997. Strong gross margins have allowed Newbridge to invest aggressively in research and development yet still produce a return on sales in excess of the majority of our competitors. The continued growth in sales and profitability in fiscal 1997 further strengthened the Company's financial position. Newbridge closed the year with $1.5 billion of assets, virtually no debt and $334 million of cash and cash equivalents.
The Company's vision of a common, ubiquitous, managed network, carrying multiple services and applications on a broadband core, continues to be the prime driver of product developments. Building on its extensive expertise in voice, data and video, Newbridge is pioneering the development of managed, multimedia, multiservice networking.
Together with alliance partner Siemens, Newbridge recently launched the broadband MainStreetXpress architecture and the first of a family of jointly developed products. The MainStreetXpress 36190 Core Services Switch was very well received, winning Best of Show in the infrastructure category at ComNet '97 in Washington D.C. The product is the first ATM switch designed to scale with high reliability to more than one terabit per second for next-generation core networks.
During fiscal 1997 frame relay and circuit emulation capabilities were added to the MainStreetXpress 36170 Multiservices Switch. Service providers can use this advanced 12.8 Gbit/s platform to deliver managed frame relay, private line, cell relay and broadband services on a common high capacity core.
In the coming year the MainStreetXpress 36170 system will be the focus of further developments. A next generation carrier scale internetworking solution will provide a much more robust and scalable core IP network than traditional router-based networks and will have services management and Quality of Service (QoS) as inherent capabilities. In addition, the MainStreetXpress 36170 system will support advanced access solutions including integral broadband wireless modems and high density ADSL (asymmetric digital subscriber loop) interfaces. Already the MainStreetXpress 36170 system has captured a large number of service provider core networks around the world, based on its multiservices capability and the flexibility and cost of deployment of these access solutions.
Another aspect of the architecture of the MainStreetXpress 36170 system which is very important to the future of multiservices networks is its ability to be interconnected through wave division multiplexing (WDM). This allows the dramatic reduction of costs associated with the deployment of ATM systems by effectively distributing system shelves throughout a metropolitan area. A new Newbridge Affiliate company, Cambrian Systems, is completing the development of a WDM solution tailored to the MainStreetXpress 36170 system.
Newbridge has been very active during fiscal 1997 with the development of ATM access systems. New releases of the MainStreetXpress 36150 were completed during the year, making this 2.4 Gbit/s system the most feature-rich ATM access solution available. A new ATM access system, the MainStreetXpress 36130, was introduced late in fiscal 1997. The system is designed to accommodate a broad range of legacy environments including X.25, frame relay, and voice and data interfaces with a wide complement of protocol support.
The new 3600+ MainStreetr Bandwidth Manager was launched recently, adding SONET/ SDH interfaces to the widely deployed 3600 and 3645 MainStreet bandwidth manager product line. This product will have wide applicability for service providers as well as hybrid private/public network operators. The Newbridge bandwidth manager product line has the widest range of international WAN interfaces in the industry.
Newbridge strengthened its involvement in the enterprise networking market during fiscal 1997 by acquiring UB Networks. Newbridge chose UB Networks because it offers strong direct and indirect channels to market and supplies systems to a large customer base. In addition, UB Networks has a wide range of valuable LAN switching products and network management solutions. The UB Networks product line is being integrated into the Newbridge VIVID switched routing solution, our strategic architecture for the campus backbone.
In fiscal 1997 the VIVID family of LAN internetworking products was rounded out with the addition of several new high speed interfaces to connect to local area networks, the addition of the VIVID CS 3000 -- a high performance ATM switch designed as a distributable backbone that offers up to 32 155 Mbit/s or eight 622 Mbit/s interfaces -- and the integration of the UB Networks GeoLAN/500 product line.
We demonstrated MPOA interoperability this year between VIVID systems and systems from Fore and Cisco. In addition, I am pleased that the VIVID system won Data Communications magazine's Tester's Choice Award. Sales of the VIVID product line are growing rapidly with an increasing acceptance by corporate users of switched routing and the MPOA standard. VIVID is well represented with customers in all industry sectors including education, finance, government and manufacturing.
In fiscal 1997 Newbridge acquired French telecommunications equipment manufacturer OST (Ouest Standard T‚l‚matique), strengthening the Newbridge position as one of the leading suppliers of LAN and WAN equipment in France. OST's customers, including France's large installed base of X.25 users, are benefiting from Newbridge expertise in frame relay and ATM, through a clear migration path to high performance networking.
The Scandinavian market is deregulating and service providers are rapidly implementing broadband ATM technologies and services. To fully capitalize on the opportunities created by this activity, Newbridge acquired Danring from Tele Danmark. Danring has been a distributor of Newbridge networking systems since 1987. Early last year, Tele Danmark selected Danring to supply Newbridge equipment for one of the largest ATM backbone networks in Europe. The network provides advanced broadband business services and consolidates existing frame relay and leased line traffic.
This year Newbridge increased its presence in Latin America by acquiring a majority interest in Coasin Chile S.A., a leading telecommunications engineering, distribution, and marketing company. Coasin Chile has been a Newbridge distributor for 10 years. Using advanced networking systems from Newbridge, Coasin installed the largest TDM network in Latin America for CTC Chile and recently completed the installation of a nationwide commercial ATM network - the first in Latin America - for Entel Chile.
In other significant developments, Newbridge signed a distribution agreement with Matsushita, a major equipment manufacturer based in Japan. The contract is the largest Newbridge has ever been awarded in Japan.
Newbridge invests in highly focused affiliate companies. This strategy enables the Company to drive the development of products and markets that are complementary to its core business. In fiscal 1997, Newbridge formed a number of new Newbridge Affiliates including: Telexis (secure video and multimedia products), Vienna Systems (server-based products to deliver voice, data and video across IP networks), nCipher (crypto-acceleration products), FastLane (network administration software), and Cambrian Systems (WDM systems). Another Newbridge company, ACC, launched the industry's first carrier-class integrated access platform this year. The ACC TigrisT product combines high performance routing with a high capacity remote access server on a single platform, allowing access to the Internet, intranets and other legacy networks for dial-in users and remote offices.
Newbridge is now well established as a $1 billion company and the business activity level is an indicator of continued strong growth. The world's top 200 service providers are counted among our customers. We are gaining an even stronger market presence through our partners and particularly with our alliance partner, Siemens. I am confident that our entrepreneurial approach to product development and the continued expansion of our channels in high growth markets positions Newbridge for success into the next millennium. |
