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Technology Stocks : CrossKeys Systems Corp [CKEY and CKY/TSE] -- Ignore unavailable to you. Want to Upgrade?

To: Joseph McKeown who wrote (449)	3/4/1999 5:59:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 792

Amdocs reaches deal to buy Architel $330-million (U.S.) pact is the third major U.S. acquisition of a Canadian firm this week Thursday, March 4, 1999 MARK EVANS Technology Reporter Amdocs Ltd. has reached a deal to buy Architel Systems Corp. for about $330-million (U.S.), making it the third major acquisition of a Canadian company by a U.S. suitor this week. St. Louis-based Amdocs said yesterday that it plans to issue 0.95 shares for each Architel share. The $21.08-a-share offer, $32.04 (Canadian), based on Amdocs closing price yesterday, represents a 34-per-cent premium to Architel's closing stock price of $23.90 Tuesday before the deal was announced. The deal doesn't come as a big surprise because Murray Hill, N.J.-based Lucent Technologies Inc., which competes against Architel, bought Kenan Systems Corp. in January for $1.48-billion (U.S.). Analysts expected Amdocs, which goes head-to-head with Kenan, to buy a telecommunications software maker such as Architel to stay competitive. Amdocs makes software used by telecommunications carriers to do billings and provide customer service. Architel's technology is used to automate the management of customer orders, activate services and manage network inventory. "It's the right thing to do for both companies," said Doug Ashton, an analyst with Jefferies & Co. in Boston. "It will accelerate both companies' growth rates and leave everyone else in the industry gasping for air. Mr. Ashton said he believes there was another bid on the table for Architel, which may explain why Amdocs is willing to pay a hefty premium. But it's unlikely another offer will surface because Anthony van Marken, Architel's president and chief executive officer, and David Curry, a senior vice-president and co-founder, have agreed to vote their shares in favour of the deal. Toronto-based Architel has also granted an Amdocs unit an option to purchase another 1.5 million common shares, which would become exercisable if the deal isn't completed. The shares owned by Mr. van Marken and Mr. Curry and the stock option would give Amdocs a 19.9-per-cent stake in Architel. Architel's largest shareholder is Altamira Investment Services Inc., which amassed its 13-per-cent stake for about $6 (Canadian) a share. Helix Investments (Canada) Ltd. owns a 5-per-cent interest. Architel shares jumped $6.10 to $30 on the Toronto Stock Exchange yesterday after hitting a record high of $34.50 earlier in the day. Amdocs fell $3.62 (U.S.) to $22.19 on the New York Stock Exchange. Amdocs' planned purchase of Architel reflects the growing trend of foreign companies taking advantage of Canada's low dollar and modest stock valuations to hunt down bargains -- making Canada the "Wal-Mart" of the acquisition world. "That's a huge theme because [Canadian] stocks do trade at a huge discount," said Barry Richards, an analyst with Sprott Securities Ltd. This week alone, New York-based Polo Ralph Lauren Corp. bid $79-million (Canadian) for Toronto-based Club Monaco Inc., while Hampton, N.H.-based General Chemical Group Inc. agreed to buy Toronto-based Noma Industries Inc. for $330-million. Amdocs' purchase of Architel will create a company with 3,600 employees and revenue of more than $430-million (U.S.), based on their combined sales in fiscal 1998. Architel had revenue of $50.8-million (Canadian) in the year ended Sept. 30, and employs 414 people. The company does not expect layoffs. Amdocs and Architel are enjoying strong revenue growth as telecommunication carriers seek ways to streamline operations and improve service in an ultracompetitive market. Amdocs' customers include Rogers Cantel Mobile Communications Inc. of Toronto and BellSouth Corp. of Atlanta, while Architel's clients include Montreal-based BCE Mobile Communications Inc. and, most recently, Britain's BT PLC. Analysts said Architel's fate was sealed in January after it beat out Lucent to supply software to BT. The contract reflected Architel's strong technology and its growth prospects in Europe. Avinoam Naor, president and CEO with Amdocs Management Ltd., said Lucent's purchase of Kenan, which competes against Amdocs, didn't prompt its decision to acquire Architel. "Our move here is not defensive, it's offensive," he said, adding that Amdocs believes that Kenan will be less of a threat because Lucent is more focused on selling telecommunications equipment than offering software and services. Mr. Naor said Architel will operate as a division of Amdocs with headquarters in Toronto and he expects more jobs to be created in Canada. TECHNOLOGY TAKEOVER Amdocs Chairman: Bruce Anderson NYSE symbol: DOX Head office: St. Louis, Mo. Operations: Provides product-driven information system solutions to major telecommunications companies around the world, integrated customer care and billing systems for wireless and wireline network operators as well as for companies that offer multiple service packages. Architel Systems Chairman, president and CEO: Anthony van Marken TSE symbol: ASY Head office: Toronto Operations: Develops, markets and supports operations support systems to the global telecommunications industry. Their principal product, "Automation Services Activation program," is used by telecommunications service providers. Other products include work force management software and craft access software. Source: Datastream and Bloomberg Financial Services

To: Joseph McKeown who wrote (449)	3/4/1999 8:10:00 AM
From: Glenn McDougall	Respond to of 792

CrossKeys tumbles after sales stumble Loss of key contract with Siemens takes shine off of network software firm Thursday, March 4, 1999 SIMON TUCK Technology Reporter Ottawa -- The mystery that surrounded CrossKeys Systems Corp. shares for the last eight months or so has ended. Since the stock began to tumble last summer, analysts and shareholders have been baffled by the networking software company's sluggish share price that seemed to defy the company's impressive résumé: a strong reputation, a first-class pedigree, hefty contracts with telecommunications powerhouses Newbridge Networks Corp. and Siemens AG, a technology deal with Ascend Communications Inc., the title of Canada's fastest-growing company and, perhaps most significantly of all, soaring revenue figures. The puzzle no longer needed to be pieced together after the Kanata, Ont.-based company surprised analysts by announcing last week that its third-quarter numbers were below expectations and weren't expected to show much improvement for at least two more quarters. The disappointing numbers, at least for now, override the company's many attributes. Investors reacted sharply, sending the share price to a 52-week low. The stock fell 28.4 per cent or $2.50 to $6.30 on the Toronto Stock Exchange Friday, the first day of trading after the announcement. CrossKeys shares fell 5 cents to $5.65 Tuesday. "I'm disappointed that the response of the marketplace was quite so swift and so harsh," said John Selwyn, CrossKeys president and chief executive officer. With the dramatic turn south, CrossKeys joined JetForm Corp., Data Mirror Corp., and Geac Computer Corp. in the newly formed line of struggling Canadian software companies looking to find a way to get back on the growth path. Unlike its neighbours in the misery ward, however, the company's problems have nothing to do with the looming millennium bug that is diverting corporate spending away from many large software investments. CrossKeys' woes were blamed on the premature loss of a major customer, the demise of another and weaker market conditions in Asia and Latin America. But like the other software companies, analysts say, woes can't be pinned on faulty technology or strictly internal problems. "A lot of good things are going on there," said Barry Richards, an analyst with Sprott Securities Ltd. in Toronto. The company's primary problem is that sales to Siemens are expected to fall as much as 75 per cent to $1-million to $2-million a quarter from $4-million because the German giant has decided to develop its own network software instead of buying it from CrossKeys. Although the Siemens relationship was expected to end at some point over the next two or three quarters anyway, its early demise came as a blow to CrossKeys. That news comes only weeks after the Canadian company had to take a $1-million writedown because another customer, West End Systems Corp., a fellow Newbridge Networks Corp. affiliate, went out of business. But those were only the most recent items in a string of misfortunes at CrossKeys. Last year, Digital Equipment Corp., another key customer, slashed its orders after it was purchased by Compaq Computer Corp. and the Ascend deal was also jeopardized when that company was bought by Lucent Technologies Inc. The recent stumble has taken some of the shine off a company that had shown great potential. At least two analysts have now released reduced earnings estimates. "The short-term outlook is not a pretty one," said Mr. Richards, who lowered his share earnings estimate for the fiscal year to 35 cents from 41 cents. "It's rather unfortunate that a bunch of things have all gone wrong [at once]." Michael Urlocker, of Credit Suisse First Boston Corp. in Toronto, also cut his earnings estimates, dropping his forecast to 36 cents from 44 cents. "Management warned that a tough spot lies ahead for at least two quarters," he told clients. Some analysts also say Siemens' action spells bad news for Newbridge and its rocky relationship with the German giant. "I believe and have believed that Newbridge and Siemens have been parting ways," said Mr. Urlocker. "It's a one-product alliance. It doesn't have joint development and it doesn't have other products." But Duncan Stewart, a portfolio manager with Tera Capital Corp. in Toronto, said that it would be wrong to presume that Newbridge and Siemens are about to end their association just because Siemens and CrossKeys are winding down their relationship. He said that it is "perfectly legitimate" for Siemens to develop software that serves the same niche as that of CrossKeys. The Siemens move may also rekindle talk that CrossKeys would be better off if it weren't under Newbridge's wing. CrossKeys said that Newbridge owns 25 per cent of its stock and that Newbridge chairman and chief executive officer Terence Matthews has an additional 18 per cent through a holding company. But Mr. Selwyn said CrossKeys gains more from the affiliation than it loses, although he acknowledged that the relationship with Newbridge does occasionally close some doors. Analysts say the remedy is simple: Find new customers, sign new contracts, improve the numbers. Mr. Selwyn said that's exactly what the company plans to do. "I want to use this as a kick in the pants to increase the hustle." But Mr. Richards said it won't be easy to turn things around in the short term after losing the Siemens business. "It'll take a couple of quarters. They're going to have a tough time replacing $3-million to $4-million."