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

To: pat mudge who wrote (6092)	8/22/1998 8:41:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 18016

BOSS NABS LUTZ OF CASH NEW NEWBRIDGE COO'S THREE-YEAR DEAL STARTS AT $1.3M By STUART McCARTHY -- Business Editor A stratospheric paycheque for Newbridge Networks' new president and COO is raising eyebrows among market watchers. Alan Lutz came on board at Newbridge in June and signed a three-year agreement exclusive of stock options, which could reach as high as $1.3 million this year, rising to $1.8 million in the third year. The compensation package gives Lutz a higher base salary at $750,000 than Nortel CEO John Roth, who last year received $609,624. Roth also took home a hefty bonus of $1.2 million. Nortel, on the other hand, had revenues of more than $15 billion -- at least seven times that of Newbridge. Lutz's cash deal is also significantly higher than the $200,000 paycheque of Newbridge chairman and founder Terry Matthews, although Matthews holds more than 42 million shares -- about 23% of the company. Lutz will also get 500,000 stock options up front and included in his pay is $275,000 each year to buy additional shares at market value. The deal also indicates that Lutz will reside in Herndon, Va. and travel to Kanata. Lutz's compensation is also astronomical compared to other Ottawa-area hi-tech CEOs. JetForm's John Kelly in 1997 received $240,000, not counting stock options. Rod Bryden, CEO of WorldHeart Corp., draws a salary of $214,919. "My breath just went away," said Rob McLellan, an analyst with Kearns Capital in Toronto, when he found out about Lutz's salary. "That's surprising," said McLellan. "That causes me a little concern." Given Newbridge's current financial picture, McLellan says he's hard pressed to see why such a high price is being paid. "Alan Lutz is not known as a turnaround expert," he said. In terms of the recent restructuring announced by Newbridge, McLellan sees it as more of a reshuffling with little benefit. The 20-odd-page employment agreement for Lutz was among disclosures made to U.S. securities regulators when the Kanata company filed its latest annual report. Newbridge spokesman Paul Goyette wouldn't comment on Lutz's salary and didn't think it had been made public. Meanwhile, McLellan says Newbridge's deal this week for $500 million in equipment to supply two Canadian local multipoint communication systems (LMCS) networks is a real kick in the teeth to Nortel. The deal effectively gives Newbridge a lock on the Canadian market for the wireless high-speed multimedia communications systems. The coup is that the technology came from a Winnipeg company which Nortel acquired last year for $300 million. Newbridge had invested $15.8 million for a 15% stake in BNI in 1996. BNI was about to go public in late 1997, when Nortel stepped in and bought the company. As a result, Newbridge got more than $66 million in cash and Nortel shares in return for its investment, plus some core technology. "We got the ATM (asynchronous transfer mode) interface card that brings this technology to the MainstreetXpress 36170 switch," said Goyette. The Chicago-based International Engineering Consortium is presenting Newbridge with the Infovision Award for the interface card in October. "The fact that they won it (the contract to supply WIC Connexus and Maxlink Communications) is a slap in the face for Nortel considering what they paid for BNI," said McLellan. "But it's not the be-all and end-all ... but this is a bit of a public embarrassment." Nortel's wireless networks spokesman Mark Buford said his company reads nothing but good news into the Newbridge win. He called it a vindication of Nortel's offering which is currently the only product shipping commercially. Nortel has a $750-million US deal with Teligent for LMCS equipment in the U.S. "We fully expected Newbridge to be competitive," said Buford. "We're really excited that Canada's moving forward to embrace the technology."