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: Glenn McDougall who wrote (6423)	9/10/1998 7:52:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 18016

Newbridge sells stake in ACC for $285 million U.S. Deal might foreshadow deepening alliance with Ericsson James Bagnall The Ottawa Citizen Newbridge Networks Corp. is unloading its 60-per-cent stake in California-based Advanced Computer Communications Corp. for a healthy $285 million U.S. The move will substantially bolster Newbridge's cash position and might lead to a broader strategic alliance with LM Ericsson, the Swedish telecommunications giant that is buying ACC. "Newbridge got a very nice price for this transaction," said Paul Silverstein, an analyst with New York-based BancAmerica Robertson Stephens. "It can now invest the cash in higher-return businesses." The relatively high price paid by Ericsson is a measure of the importance the Swedish firm attaches to ACC's data networking technology as a catalyst for new growth. Ericsson is already a global powerhouse. At the close of trading yesterday, it had a market capitalization of $40.8 billion U.S, compared with $33.4 billion U.S. for Northern Telecom Ltd. and $3.7 billion U.S. for Newbridge. But Ericsson's overwhelming strength is in wireless communications systems. Ericsson executive vice-president Anders Igel said yesterday his firm intends to use ACC's expertise in Internet-based networks to build integrated voice-and-data systems for large corporations. Mr. Igel added that Ericsson will also adapt its flagship telephone switching products to incorporate ACC's Internet know-how. The interesting part of all this is that Newbridge is still very much in the picture, even though it has sold its entire stake in ACC. (Ericsson is buying the remaining 40 per cent of ACC from other shareholders.) Newbridge will continue to sell ACC's remote access routers and to participate in some of its research and development activity. Indeed, Newbridge chairman Terence Matthews hinted very strongly that other deals involving Ericsson could soon be in evidence, including ones that would involve "working together with ATM." ATM, short for asychronous transfer mode, is a technology that lies at the heart of Newbridge's core product line. Ericsson has already agreed to support Newbridge's preferred technical standards for delivering Internet signals over ATM. The ACC deal "represents quite a strengthening of our relationship with Ericsson," Mr. Matthews said during an hour-long conference call. "The chemistry is very good with the Ericsson company." When queried about whether the new relationship with Ericsson will take away from Newbridge's longstanding alliance with Siemens AG of Munich, Mr. Matthews stressed the Siemens relationship remains "good." Siemens remains a major sales channel for Newbridge products and is helping Newbridge to co-develop a next-generation ATM switch. Both Siemens and Ericsson have been cited as potential buyers of Newbridge in a rapidly consolidating network equipment industry. For the moment at least, Newbridge is pursuing a strategy of developing alliances, rather than positioning itself for immediate sale. Either way now, it has options. The sale of its stake in ACC marks the first time Newbridge has sold one of its nearly two-dozen affiliates outright, but then ACC has always been something of an anomaly. The $50-million U.S.-a-year company is one of very few firms in which Newbridge holds a majority stake. It was also the first affiliate to be based outside Canada. Newbridge began acquiring equity in ACC in the early 1990s, at least in part to gain access to ACC's data networking technology. At the time, Newbridge was developing a line of data networking products, sold now to corporations under the Vivid brand name. Interestingly, at about the same time Newbridge was picking up its first shares in ACC, it had an opportunity to buy at least a piece of Wellfleet Communications --Ethe company that is now serving as the Boston-based centre of expertise for Nortel's push into large-scale data networking. Newbridge declined, but it hasn't done badly by ACC. After all, the Vivid line is starting to show growth potential. And Newbridge will reap a huge capital gain on the sale of its stake to Ericsson. Just how much Newbridge will realize won't be clear until Newbridge reports its second fiscal quarter in late November. Newbridge shares closed yesterday at $32 on the Toronto Stock Exchange, up 60 cents. Ericsson closed at $22 7/8 in New York, down $1 5/8.

To: Glenn McDougall who wrote (6423)	9/10/1998 10:37:00 AM
From: pat mudge	Respond to of 18016

mainstreetxpress.com Effective June 8, 1994 the Company acquired a controlling interest in Advanced Computer Communications ("ACC"), a manufacturer of local area network (LAN) bridges and routers. During the first quarter of fiscal 1995 the Company increased its equity interest in ACC from 46% at April 30, 1994 to 51% by the purchase of shares in the amount of $1,356,000. The acquisition has been accounted for by the purchase method of accounting. Because ACC's fiscal year ends March 31, ten months of ACC's results were consolidated with those of the Company for the fiscal year ended April 30, 1995. Goodwill is being amortized on a straight line basis over a ten year period, commencing in the period in which the investment was made. The Company's investment in ACC is summarized below. Non-cash working capital $ 7,336 Property, plant and equipment 3,173 Other long term assets 131 Long term liabilities assumed (255) ------- Net non-cash assets acquired 10,385 Cash acquired 1,599 ------ 11,984 Non-controlling interest upon acquisition (5,926) ------ Company's share of assets acquired 6,058 Equity in losses of ACC prior to obtaining controlling interest 2,053 Goodwill upon acquisition 13,688 ------- Total consideration paid $21,799 ======= Not a bad return on investment. And as I understand it, NN maintains full access to ACC's products and manufacturing rights, in exchange for a Tier One CSI partnership in Ericsson who now has invested interests in getting the architecture through the standards process. TM also alluded to other CSI partners in the near future. There are a lot of noisy competitors out there but none with an end-to-end, fully scaleable carrier class solution like CSI. Do you get the feeling the entire affiliate portfolio has been taken outside and given a good once-over to see which do what the best? Later -- Pat