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

To: Glenn McDougall who wrote (9817)	2/24/1999 7:09:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 18016

Newbridge aims for earnings growth of 50 per cent James Bagnall The Ottawa Citizen Alan Lutz, the chief operating officer of Newbridge Networks Corp., is not one to brood over past defeats. Three weeks after having to acknowledge the company would fall short of analysts' third-quarter estimates, Mr. Lutz did little yesterday to reduce expectations for next quarters. "There will be significant revenue growth this quarter," he told analysts during a telephone conference call. "Our earnings will grow 50 per cent or so in fiscal 2000," he added. Mr. Lutz said he would soon be unveiling some significant new products, notably one that will allow telephone companies to offer full voice services through data switches using asynchronous mode transfer (ATM) technology. He added that Newbridge had outgrown its ATM-only heritage and would soon be known as a firm that develops products using ATM and Internet Protocol (IP). "We're very serious about IP," he said, adding that Newbridge is consolidating resources in the Boston area to tackle this end of the business. "We are moving executive talent down there and we will build that group." Interestingly, Newbridge is following the lead of Brampton-based Northern Telecom Ltd. on two fronts. First, Nortel decided very early on that it would design and build networks using either ATM or IP protocols - or both. Newbridge only recently has been positioning itself as a firm that builds both types of data networks. Second, Nortel has also made the Boston area its focal point for developing IP technology. Mr. Lutz said Newbridge's board of directors gave their approval yesterday to continue his push into next-generation wireless technologies, despite the loss Monday of a significant contract to archrival Cisco Systems Inc. of San Jose, California. Mr. Lutz's focus on new products is deliberate. Newbridges's third-quarter earnings warning was triggered by a slowdown in sales of its older product line, which is based on time division multiplexing technology, or TDM. Yesterday, he advised analysts to assume no growth in TDM revenues, which fell to $165 million in the third quarter ended Jan. 31, compared with $195 million in the second quarter. This, in turn, means that nearly 38 per cent of Newbridge's total sales are being generated by products that aren't contributing to growth at all. And that puts a lot of pressure on the firm's remaining products to make up the difference. Fortunately, sales of ATM switches have been robust -- they were up 35 per cent in the third quarter, compared with the second quarter -- and Mr. Lutz noted that "order input continues strong." But to safeguard that revenue stream, Newbridge must constantly refresh its product portfolio. The new emphasis on IP and wireless technologies is meant to contribute to this effort. Newbridge also expects that its next-generation ATM switch -- a 50-gigabit-per-second device -- will be in customers' hands by year-end. The final numbers for the third quarter were very close to what the company reported in its preliminary estimate last Feb. 4. Excluding one-time gains or hits, Newbridge recorded net third-quarter earnings of $46.2 million, or 26 cents per share, on sales of $450.8 million. This compared with net profits of $17.1 million, or 10 cents per share, on revenues of $358.5 million during the very weak quarter a year earlier. Third-quarter earnings translate to 17 cents U.S. per share, compared with the original consensus estimate of 22 cents U.S. In the wake of the Feb. 4 earnings warning, analysts have already shaved 10 cents U.S. per share from their estimates for fiscal 1999, which ends April 30. This produces a new consensus estimate of 70 to 71 cents U.S. per share. Mr. Lutz said yesterday that $1.05 U.S. per share target for fiscal 2000 was "in the general ballpark"