Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: pat mudge who wrote (5406)	7/1/1998 9:12:00 AM
From: Don Beals	Read Replies (1) \| Respond to of 18016

Bullish article on Newbridge in Globe and Mail this morning. The gist of the article is that analysts are bullish on NN but investors have yet to follow.

To: pat mudge who wrote (5406)	7/1/1998 9:35:00 AM
From: Glenn McDougall	Read Replies (2) \| Respond to of 18016

ANALYSTS RECONNECT TO NEWBRIDGE THE GLOBE AND MAIL, WEDNESDAY JULY 1, 1998 But even with expectations of improved profit, investors aren't buying the battered stock By Rob Carrick Investment Reporter Analysts are rallying around Newbridge Networks Corp., even while investors keep heading for the exits every time the share price show some life. "Buy" and "strong buy" ratings are flying around Newbridge in a way that recalls the enthusiasm preceding the demolition of its share price between October and February. Some analysts retain a more cautious stance on the Kanata, Onatario based maker of telecommunications equipment, buy they're now in the minority. The crowd now believes Newbridge has dealt with its problems and is poised to deliver a much improved level of profitability. For months, Newbridge shares have bibbed up and down as investor psychology was influenced by a mix of disappointing quarterly results, troubles in one of its business lines and optimism about momentous growth in demand for the kinds of products the company makes. Newbridge shares have twice risen above $40 the year, only to make a U turn shortly after. Most recently, investors bid the stock up to $46.05 on May 8 and then slashed it back to $31.40 over the next six weeks. The shares have since rallied back to a close of $35.15 on the Toronto Stock Exchange yesterday, down 15 cents on the day. "In order to completely regain investor confidence, Newbridge needs to string together a few good quarters showing earning growth," said analyst Todd Coupland of CIBC Wood Gundy Securities Inc. Mr. Coupland believes this will happen, in large part because of the expected growth in demand from telecommunications companies upgrading their networks to carry more data traffic. He expects 60-per-cent annual growth in this wide-area network packet business, which includes the asynchronous transfer mode switch. The importance of data networking can be seen as a driving force in many of the recent developments in the telecommunications sector, said analyst Patrick Houghton of Wheat First Union in Richmond, Va. Mr. Houghton said Northern Telecom Ltd. Has tried to upgrade its capability in this area through its controversial 9.1 billion (US) purchase of Bay Neworks Inc. Lucent Technologies Inc. has also been trying to build up its networking product line, while industry leader Cisco Systems Inc. has introduced new offerings lately as well. "I'm not saying Newbridge is going to have the dominant market share going forward, but I think they'll get their fair share against the Lucents and the Ciscos," Mr. Houghton said. "And if you look at where these companies are positioned right now, Newbridge is the cheapest of the bunch on a price-to-sales and price-to-earnings basis." The other reason why analysts are increasingly optimistic about Newbridge is their judgement that the most pressing problems of the past year are now history. Nothing caused Newbridge more trouble than the souring of its attempt to diversify into business network equipment by purchasing California-based UB Networks a year and a half ago. UB brought a noxious combination of rising costs and declining sales that Newbridge tried to address, but couldn't. When Newbridge announced its $18.3 million (Canadian) loss for fiscal 1998, restructuring charges connected with UB were a major contributor. Newbridge also had to cope in the past year with a major decline in demand for time division multiplexer (TDM) switches, an older technology used to increase the amount of data that can flow down a telephone line. The biggest customers for TDM switches are in China, Japan and elsewhere in Asia and most cut buck on orders after the region's economy keeled over in the past year. No one forecasts a big rebound in TDM sales in the year ahead, but the feeling is that they will at least stabilize. Newbridge stock reached a 52-week high of $95 last Oct. 8 after a phenomenal six-month rise from the $40 range. The ensuing pulverization brought the price to $26.75 its 52-week low. Stung by the stock's collapse, many analysts scaled back the "buy" recommendations they had maintained even as the price vaulted past $90. While many have jumped back onto the bandwagon, there are those who have remained cautious. rob macLellan of kearns capital inc. lowered the stock to "reduce" from "hold" just over a month ago when it was above $40 and predicted a decline back to $32 within 18 months. As noted earlier, it took only six weeks for this to happen. Among those to take a more positive view on Newbridge recently were David Beck of TD Securities Inc. and Benn Mikula of RBC Dominion Securities Inc., both of whom upgraded the stock to a "Buy." Others to either issue new "Buy" calls or reiterate old ones in the past few weeks include Michael Neiberg of Furman SilZ LLC, Paul Johnson of BancAmerica Robertson Stephens and James Kedersha of Cowen & Co. Mr. Coupland said he has a "Strong Buy" on the company with a 12-month target price of $60 that is based on the expectation of a sustained rise in profit. He forecasts earnings per share of $1.25 for the current fiscal year and $2.00 for fiscal 2000, which compares to a loss of 10 cents for the year ended April 30. Mr. Houghton said he also has a "Strong Buy" on Newbridge and a share price target of $40 (U.S.) in 12 months. Newbridge closed down 2 cents to $24.04 yesterday on the New York Stock Exchange. "Newbridge fell to ridiculous levels," Mr. Houghton said in summary of the stock's travails. "I think it"s a real good buy right now." BOTTOM LINE AS FAR AS ANALYSTS GO, THE PACK IS BACK ON NEWBRIDGE FILE. INVESTORS HAVE YET TO FOLLOW. REGARDS GLENN