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

To: Mark Oliver who wrote (6513)	6/15/1998 1:21:00 PM
From: Anthony Wong	Respond to of 6980

Northern Telecom to Buy Bay Networks for US$9.1 Bln (Update2) Bloomberg News June 15, 1998, 12:05 p.m. ET Northern Telecom to Buy Bay Networks for US$9.1 Bln (Update2) (Adds details, analyst comments in 3rd, 4th, 6th, 7th paragraphs.) Brampton, Ontario, June 15 (Bloomberg) -- Northern Telecom Ltd. agreed to buy Bay Networks Inc. for US$9.1 billion, joining North America's second-largest telephone-equipment maker with the No. 3 maker of products to link computers to the Internet. Northern Telecom will exchange 0.6 share for each Bay share, valuing Bay at US$38.21 a share based on Northern Telecom's closing price Friday of 63 11/16 in New York. That's 35 percent more than Bay's closing price of 28 5/16. The purchase gives Northern a broader line of computer- networking equipment and distribution channels as it seeks to increase its share of a fast-growing market. Yet Bay has struggled this year as sales of its older networking gear plunged and fierce price competition from larger rivals Cisco Systems Inc. and 3Com Corp. cut into its profits. ''Bay comes with a lot of baggage,'' said Brendan Hannigan, an analyst with market-research firm Forrester Research in Framingham, Massachusetts. Northern shares tumbled 7 1/2 to 56 3/16 in midday trading, their biggest one-day drop since 1993. Bay rose 3 9/16 to 32 1/2. The transaction caps a month of speculation that Northern was pursuing Bay. On a conference call, Northern Telecom said it expects the acquisition to be ''slightly'' dilutive to 1998 earnings and will add to 1999 earnings, before acquisition-related costs. Northern Telecom also said it sees ''substantial'' revenue growth from the purchase. Internet Traffic Once the transaction is complete, the combined company will have a workforce of 80,000 and operations in 150 countries. Nothern, like rivals Cisco and Lucent Technologies Inc. and Cisco, wants to sell more gear to phone companies and Internet service providers, who need to expand their networks to handle growing Internet traffic. ''This gives Nortel a more complete set of (Internet protocol) technology,'' said William Becklean, an analyst at Tucker Anthony Inc. who rates Bay ''buy.'' John Roth, Northern Telecom president and chief executive, will remain chief executive of Northern Telecom. Dave House, chairman and chief executive of Santa Clara, California-based Bay, will become president of Northern Telecom and join its board. Brampton, Ontario-based Northern Telecom is 51 percent owned by Montreal-based BCE Inc., Canada's biggest telecommunications company. BCE's stake after the Bay purchase will be 41 percent. The agreement is the third multibillion dollar purchase this month involving telecommunication and data-networking companies. Phone equipment maker Tellabs Inc. agreed to buy Ciena Corp. for $6.86 billion on June 3, while French phone-equipment giant Alcatel Alsthom SA agreed to buy DSC Communications for $3.98 billion on June 4. --Boyd Erman in the Toronto newsroom (416) 364-7300 and John