"The Ottawa Citizen" comments about today's event at NN:
ottawacitizen.com
Tuesday 28 July 1998
New boss expected to revamp
Newbridge
Allan Lutz to announce reorganization
in bid to restore confidence
Caroline Van Hasselt
Bloomberg News
Newbridge Networks Corp. was expected to release details today
of a reorganization as Alan Lutz, its new president, attempts to
bolster investor confidence in the phone-equipment maker.
Mr. Lutz, 53, the fourth president and the only outside executive to
hold that position since chairman Terry Matthews founded
Newbridge in 1986, was to hold a conference call today to discuss
his plan to revamp the company.
Formerly of Compaq Computer Corp., Mr. Lutz was named
president and chief operating officer June 2, when the
Kanata-based company reported its third straight quarter of lower
profit.
"This is his coming-out party," said Paul Silverstein, an analyst with
BancAmerica Robertson Stephens in New York, who describes Mr.
Lutz's appointment as a "watershed event" in Newbridge's 12-year
history.
"He's trying to remake the company, and, while they're trying to
make a break from the past, investors are still very much locked on
its track record."
Newbridge, with 1997 revenue of $1.62 billion, makes high-speed
data networking gear that phone companies use to combine voice,
data and Internet traffic.
Over the past three quarters, the company has posted disappointing
profits, as sales of its asynchronous-transfer-mode switches failed
to offset slowing sales of older product lines. ATM equipment is
used to combine voice and data traffic.
The share price has reflected the lack of investor enthusiasm,
sliding 67 per cent from its 52-week high of $92.35 on Oct. 7.
Newbridge shares fell $1.15 to $30.80 in Toronto yesterday. This
month, the stock has declined 12 per cent.
Among other changes, Mr. Lutz is expected to reorganize the
company into three product-focused divisions, as opposed to the
current structure in which all managers ultimately report to Mr.
Matthews.
"He's bringing a breath of fresh air," said Mr. Silverstein.
Mr. Matthews, 55, started Newbridge after founding Ottawa-based
Mitel Corp. with Michael Cowpland, now president and chief
executive of Corel Corp. Mr. Matthews owns 21 per cent of
Newbridge. Three directors, all close to Mr. Matthews, resigned last
month.
The company, already hurt by lower sales of older products, was
sidetracked last year after it bought UB Networks, a networking
hardware and software vendor, from Tandem Computers Inc. in
December 1996.
Newbridge's profit before a charge in the fiscal fourth quarter ended
April 30 fell 52 per cent to $32 million, or 18 cents a share, from $67
million, or 39 cents a share, a year earlier. Newbridge reports fiscal
first-quarter results on Aug. 25.
Newbridge, along with Cabletron Systems Inc. of Rochester, New
Hampshire, and Ascend Communications Inc. of Alameda,
California, is one of a handful of networking companies that
generate annual revenue of $1 billion to $4 billion U.S. They
compete with rival Cisco Systems Inc. of San Jose, California, the
biggest networking company.
Mr. Silverstein rates the Newbridge a "buy" at current prices. He
compares the stock's rocky performance to that of Ascend, which
went through similar problems. Ascend's stock collapsed to the low
$20s in December 1997 from the high $70s before rebounding to a
52-week high of $54 15U16 on July 20.
A revitalized Newbridge could become a possible takeover target,
Mr. Silverstein said. "There's a fairly good chance it won't be an
independent company nine to 24 months from now."
Cisco, Northern Telecom Ltd. of Brampton, Lucent Technologies
Inc. of Murray Hill, New Jersey, and Germany's Siemens AG are all
potential bidders, he said.
Last week, Mr. Lutz said takeover rumours were "completely false,"
and "off the wall."
|
