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

To: Glenn McDougall who wrote (6360)	9/4/1998 7:49:00 AM
From: Glenn McDougall	Respond to of 18016

Newbridge to acquire Castleton affiliate James Bagnall The Ottawa Citizen In a move designed to extend the range of its own products, Newbridge Networks Corp. said yesterday it will acquire one of its affiliates, Castleton Network Systems Corp. of Burnaby, B.C. Castleton was founded only three years ago by former B.C. Tel engineer, Greg Celmainis but is obviously considered strategic to Newbridge's future. It specializes in products that allow voice and fax signals to be transported over a variety of data networks, including the Internet. More to the point, Castleton develops technology that directly connects enterprises and home businesses to data networks, including those run by telephone companies. In the industry, this is known as the access market and Newbridge wants to be a key player. Newbridge's chief operating officer Alan Lutz said recently he wants to build a $1-billion-a-year access business to complement Newbridge's main product line, a family of switching devices. "The more we looked at this," said Mr. Celmainis, "the more it became evident Castleton and Newbridge should be more tightly integrated. That's what competitors like Northern Telecom and Cisco Systems are doing." Mr. Celmainis, 32, would not disclose the price of the transaction. However, he noted the deal was triggered by Castleton's recent hunt for venture capital financing. "I won't say we didn't have offers, but a large part of our value and strategy was in working with Newbridge," said Mr. Celmainis, who worked as a senior design engineer at Newbridge in Kanata until 1995. Newbridge already owns 30 per cent of Castleton. Newbridge chairman Terence Matthews controls another 30 per cent through his personal venture capital firm, Celtic House International. Institutional investors, including Altamira, own about 10 per cent, with the remaining shares held by Castleton's 110 employees. Although the firm is headquartered in B.C., about 40 per cent of its workers are in Kanata. Mr. Celmainis said he owns less than five per cent of the firm he founded. This marks the first time Newbridge has opted for full control of one of its 21 affiliates. These are companies in which Newbridge holds a significant minority ownership stake -- usually about 33 per cent. Many are now reaching maturity, in the process presenting Newbridge with three basic options when considering how to increase the value of its investment. One is to encourage the affiliate to go public. Kanata-based CrossKeys Systems Corp. was the first to do so last December, and at least three more are expected to do so before spring. Kanata-based Tundra Semiconductor Corp., TimeStep Corp. and ACC Corp. of Santa Barbara, California, are considered top candidates, though Kanata-based Cambrian Systems Corp. could surprise everyone with an early and significant initial public offering. The second option for Newbridge is simply to sell its ownership position in an affiliate to a third party. Newbridge hasn't done this with an affiliate, although it has sold relatively small equity stakes to competitors. For example, Newbridge or Celtic House sold pieces of Broadband Networks Inc. of Winnipeg and Skystone Systems Corp. of Nepean to Nortel and Cisco respectively. In each case, Newbridge reaped a considerable profit on its original investment. The third way to deal with its affiliates is to buy them outright, as with Castleton. In this case, there is a direct cost to Newbridge in the form of a cash or stock payment. But Newbridge then gains full control over the affiliate's research efforts. BancAmerica Robertson Stephens analyst Paul Silverstein estimated in early summer that Newbridge's collective equity stakes in its affiliates were worth more than $500 million. This compares with the $85 million U.S. cost of Newbridge's initial and follow-on investments. Regards Glenn

To: Glenn McDougall who wrote (6360)	9/4/1998 1:33:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 18016

Glenn -- As a follow up on Cisco's aggressiveness, you might find this LATimes article interesting: latimes.com <<< Friday, September 4, 1998 SAVVY CONFIDENTIAL / A briefing for investors Executives Capitalize on Market Slump By EDWARD SILVER, Times Staff Writer ÿ As the market swoons, many corporate insiders have been swooning over their own companies' shares. ÿÿÿÿÿ Executives have been heavy net purchasers for the last two months, says George Shirk, managing editor of Insiders newsletter in Deerfield Beach, Fla. His reading for the week ending Aug. 27 was a bullish 59% buys versus 41% sales. ÿÿÿÿÿ The outlook according to this indicator is murkier for technology--an industry whose chieftains are known for exercising stock options rather than buying on the open market. But it's too early to tell how tech insiders reacted to the rock 'n' roll trading of recent sessions. While there seems to have been little insider buying during the summer, selling has faded in the groups hit hardest by the Asian flu and the personal computer price war, such as chip and chip-equipment firms. ÿÿÿÿÿ This matches the trend in the broader market, analysts say, where the weakest stock sectors have seen the most exuberant buying. The groups that top Shirk's scale are oil and gas, including explorer Apache Corp. (ticker: APA); gold and precious metals, including Newmont Mining (NEM); and real estate investment trusts such as Roberts Realty (RPI). ÿÿÿÿÿ One eye-opening insider play is ongoing at Oakley Inc. (OO), the Orange County sunglasses maker. Chairman James Jannard says he will add 5 million shares to his gargantuan stake. ÿÿÿÿÿ "Insiders tend to be more long-term oriented, buying on their companies' prospects six to 12 months in advance," Shirk said. "They buy value, and rather than being adept market timers, they often buy and sell early." ÿÿÿÿÿ Stock sales are a fact of life among tech executives and may indicate nothing more than diversification or funding of a home purchase. Shareholders who followed the example of execs at Dell Computer (DELL) and Sun Microsystems (SUNW), for example, would have missed much of those stocks' multiyear run-ups. ÿÿÿÿÿ But unusual selling can telegraph trouble. Insiders at publishing software developer Adobe Systems (ADBE) have made 17 sales and no buys in the last year. Last September, according to Bob Gabele at Rockville, Md., research firm CDA/Investnet, 10 insiders sold 164,000 shares in the $50 range before the stock slid into the $30s. The pattern was repeated in April as the stock neared its former heights. ÿÿÿÿÿ Current selling streaks at two industry titans, Intel (INTC) and Cisco Systems( (CSCO), are making an impression. With 21 executives unloading over the last 12 months, the microprocessor maker leads Shirk's list of Nasdaq sellers. Adds Gabele: "Selling at Intel has been rather heavy on each rally, and the sales have been coming at successively lower prices, which we feel is a negative." ÿÿÿÿÿ To Gabele, it's even more striking that in August nine Cisco insiders notified the Securities and Exchange Commission that they plan to sell 1,163,000 shares. Cisco stock has run up about 75% year-to-date. ÿÿÿÿÿ Since high prices draw out the sellers, it's no surprise that software insiders are lightening up. Insulated from Asian woes and profiting from cheaper PCs, software stocks have outperformed their tech peers this year. Insiders at PeopleSoft (PSFT), BMC Software (BMCS), Veritas Software (VRTS), Compuware (CPMR) and Open Market (OMKT) have been parting with shares recently, Gabele says. ÿÿÿÿÿ However, where the bear market came early--so-called commodity sectors like chips and disk drives--selling seems to have run its course. And that's bullish, analysts say. ÿÿÿÿ ÿ"Computer hardware and semiconductors have been traditionally at the bottom of our screen, showing the most insider distribution," Gabele said. "In the last two months they've been near the top." He says chip makers LSI Logic (LSI) and Cypress Semiconductor (CY) and equipment maker KLA Tencor (KLAC) exemplify the trend. At current prices, the bosses at these cyclical companies may see their assets as undervalued. ÿÿÿÿÿ But where are the buyers? Investors will know more after Thursday, when insiders are required to file their transactions for August with the SEC. ÿÿÿÿÿ David Coleman, a Washington money manager who invests on insider data, points to Viasoft (VIAS). Executives at the Arizona software firm, which sells tools to address the year-2000 problem, bought 93,000 shares last month on top of 425,000 in April at prices ranging from $15 to $10. From a 52-week high around $58, the stock now changes hands at $7. ÿÿÿÿÿ "We are seen as a Y2K company and nothing else--and the Y2K business will drop off," said Chief Financial Officer Mark Schonau, one of the buyers. "But we are more than that. We have new technologies for the euro conversion and modernizing mainframe systems. At these prices, the stock appears to me to be a good investment." >>>>> ÿÿÿÿÿ