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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (5799)	5/13/1998 2:55:00 PM
From: Anthony Wong	Read Replies (2) \| Respond to of 6980

TALKING POINT-Bay Networks takeover rumors Wednesday May 13, 2:32 pm Eastern Time By Eric Auchard NEW YORK, May 13 (Reuters) - Shares of Bay Networks Inc., battered by repeated earnings disappointments and a sense that rivals have bypassed the company, showed signs of a successful reincarnation on Wednesday as a possible takeover target. Bay's stock roared ahead after a news wire service report said the data network equipment maker told analysts it rejected a takeover offer from Canada's Northern Telecom Ltd. (NTL.TO - news), but that it was open to higher bids. Spokesmen for both companies declined to comment on the report. By early afternoon, Bay shares were both the most active and the biggest percentage gainer on the New York Stock Exchange. The stock was up $3.75 at $27.75, after reaching a seven-week high of $28.56 on volume of 10 million shares. Several Wall Street analysts say that the Santa Clara, Calif.-based company could fetch from $30 to $35 a share, valuing the company at roughly $6.5 to $7.5 billion. Nortel shares were down C$1.60 at C$91.50 on the Toronto Stock Exchange. Nortel an eager acquisitor in recent months, is the sixth-largest telecommunications equipment maker in the world. The report also said that Bay Networks Chief Executive David House told analysts at a meeting last week that Bay shareholders would be given the right to vote on any effort to sell the company. In interviews with Reuters, analysts who attended the meeting with Bay at a Las Vegas industry trade show said they did not hear Northern Telecom discussed by name. But three analysts said they left the meeting with the sense that Bay was more open than ever to a takeover offer. Sanford Bernstein analyst Paul Sagawa, one of those analysts, said officials of Bay made it clear they would consider takeover bids. ''If an acquisition offer for fair value for the company came over the table, they would consider it strongly, which is essentially saying the company would be for sale for the right price,'' Sagawa said. ''What they said was that any decision to sell the company would be in the hands of the shareholders,'' Cowen analyst Chris Stix agreed. ''The reason that's different is that in the past, Bay has denied they are interested in selling the company.'' Bay is the half-realized progeny of a 1994 merger of then fast-growing network equipment suppliers Wellfleet and Synoptics, but has failed repeatedly to live up to growth expectations since then. The latest disappointment came with the company's results for its fiscal third quarter ended in March, when net earnings fell 52 percent versus a year ago and revenue was lower than in the December quarter. Net income fell to $10 million, or 4 cents per share, well below the 12 cents per share analysts had expected and significantly down from the $21 million, or 10 cents a share, in the year ago quarter. Bay also has guided analysts to lower expectations for the current quarter ending in June. Bay, a supplier of sophisticated corporate computer network equipment, has fallen behind rivals Cisco Systems Inc. (CSCO - news) and 3Com Corp. (COMS - news) in courting the growing phone carrier equipment market, leaving the company isolated in its niche. However, analysts have frequently seen Bay as an attractive takeover target by traditional telephone network equipment suppliers such as Lucent Technologies Inc. (LU - news), Telefon AB L.M. Ericsson (LMEb.ST) or Nortel, which could use Bay to make a broad entry into the corporate network equipment business. Technology barriers that have traditionally divided phone equipment and data network suppliers have collapsed as the Internet has blurred the distinctions that once separated internal office systems from long distance phone networks. Analysts said the latest revenue slowdown is tied to a difficult transition Bay is trying to make in selling companies ''solutions,'' or a complete set of hardware and the services and support expertise necessary to install and maintain the increasingly complicated computer network equipment. Bay's sales efforts have historically focused on selling the actual hardware, instead of entire ''solutions,'' and the sales force have slow to embrace the new approach, analysts said. The stock, which has been an erratic performer for years, fell to as low as 15-3/8 last March before it began a dramatic rise that took it as high as 41-7/8 in October. Bay has traded in its current range since it warned of disappointing results for the first half of calendar year 1998 in March. biz.yahoo.com