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

To: Serge Collins who wrote (7259)	11/5/1998 2:32:00 PM
From: Glenn McDougall	Read Replies (2) \| Respond to of 18016

NEWBRIDGE - 3COM UNION BELIEVED IN PERIL Report finds partnership to tap LAN market strained because of conflicting product lines. Simon Tuck Globe & Mail Technology Reporter, Ottawa Newbridge Networks Corp.'s partnership with 3COM Corp. is about to die, a soon-to-be released report says, marking Newbridge's second failed attempt to break into the lucrative local-area-network (LAN) market. Although the Newbridge - 3 Com sales and marketing deal has yet to pay large dividends, it was part of Kanata, Ont. - based Newbridge's strategy to broaden its revenue base and develop successful partnerships with industry leaders. Newbridge's first attempt to enter the market, the $108 million US purchase of now - defunct UB Networks Inc. of Santa Clara, Calif., disaster that has plagued the company's bottom line and share price ever since. The one year old newbridge - 3com alliance, part of a three way relationship that includes industry giant Siemens AG, has been strained in recent months primarily because the two companies have been competing against each other in at least one product line, said Mark Fabbi, research director with Gartner Group Inc. in Toronto. Gartner Group, a leading technology research firm, is scheduled to release the report on the Siemens-Newbridge-3Com relationship this month. The Newbridge-3Com relationship is an integral part of the trio's highly touted strategy to provide business customers with high-quality and private communications over the internet, but it's not as important to the two companies as their individual relationships with Siemens. Analysts say the potential of the Newbridge-3Com relationship is more important than the revenue. "In terms of market acceptance, we still haven't seen it," said David Beck, a technology analyst with TD Securities Inc. who is bullish on Newbridge. "(But) it's not going to be seen as a positive (by investors)." Duncan Stewart, a partner and fund manager at Tera Capital Corp. in Toronto, said the Newbridge-3Com partnership has been a disappointment from the start. "It could have been better. It should have been better. But it's not." Newbridge spokesman John Lawlor wouldn't say exactly how much revenue the relationship generates for the Kanata, Ontario based company, but it's less than 10%, or the figure would have to be reported im public documents. "It's more early stage," Mr. Lawlor said of his company's relationship with 3Com. He said the alliance has been "beginning to click" over the past couple of months. "I think the Gartner Group is just wrong" A senior employee of 3Com, who wished to remain unnamed, said the partnership has been "tenuous" because Newbridge has made little effort to market 3Com gear. The employee said the arrangement with Newbridge largely has been a "paper-based" relationship. But 3Com spokesman Peter Ruzicka disagreed with the Gartner Group report. "We're still very enthusiastic about our relationship with Newbridge." Mr. Fabbi at Gartner Group said the key problem is that Newbridge this year "revived" its Vivid product, a LAN product that competes directly in 3Com's core business area. "That (move by Newbridge) suprised us quite frankly." Mr. Lawlor said Vivid is a niche product that has produced little revenue and is not threat to 3Com, one of four dominant LAN players. The relationship also has been hurt by the trio's failure to lure customers away from data networking powerhouse Cisco Systems Inc. When the three giants announced their arrangement in 1997, they said they expected other companies to join. That hasn't happened. Mr. Fabbi, who had high-level access to all three technology companies while doing his research, said it's not impossible that the Newbridge-3Com rift could be healed but it would take policy and attitude reversals on both sides. "Unless they can get it turned around fairly quickly, I don't see how it can work. There's always a scenario that it could bet better, but it's not something i'm holding my breath over." Despite the apparent problems between 3Com and Newbridge, Mr Fabbi said he found no evidence to support rumours of serious problems between Newbridge and Munich-based Siemens . For Newbridge, Siemens offers a massive global network that includes a well-proven sales channel for the pair's 36177 switch, which relies heavily on Newbridge's flagship asynchronous transfer mode technology. The relationship accounts for 12 to 18 per cent of total revenue, depending on the quarter.