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

To: Techwatch who wrote (10384)	3/18/1999 2:44:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 18016

smartmoney.com We've gotten to the point where the players who are making the commitment to really get a jump-start on next-generation equipment (companies like Lucent, Nortel and Cisco) feel like they've gotten the ammunition in-house," says Paul Sagawa of Sanford Bernstein. "The market of buyers is a little dry right now." Nonetheless, there's still a potential for major purchases, beyond the private startups that continuously fold into the larger players. Among those appearing on today's SmartMoney Communications-Equipment Screen, Newbridge gets the most mention. "I really think Newbridge is going to be acquired," says Smith. The Ontario-based company specializes in asynchronous data mode (ATM) equipment, a key technology in the push for higher-speed data transmission. And despite high marks for the quality of Newbridge's equipment, the company's share in the ATM market dipped from 22% in the first quarter of 1998 to 18% in the fourth quarter, according to data from InStat. Smith thinks the dip is unwarranted. "Newbridge is a good enough company that it deserves more of the market than it's getting," he says. Meanwhile, Newbridge continues to partner with Germany's Siemens (SMAWY) -- the two companies recently won a $500 million contract to supply equipment to Global One, Sprint's (FON) joint venture with Deutsche Telekom and France Telecom -- and reports suggest that the company is looking to make some minor investments of its own in an effort to bolster its voice-delivery capabilities. But Smith projects that the company could fetch a premium in the acquisition market. Newbridge currently trades at 22 times calendar 2000 earnings estimates. That's about half the multiple investors are paying for Lucent and Cisco. Ascend, which trails only Cisco in the ATM market, trades at 36 times earnings. Given the existing partnership, Smith thinks Siemens would be the company's most likely suitor. But Sagawa doesn't believe Siemens would need to emerge as a buyer unless another major company stepped forward with a bid. Choosing that company, though, is like "picking some names out of a hat," he says. The outlook for Fore, another ATM player on the list of acquisition candidates, is less rosy. The company said last month that it will have to hustle to meet expectations for the March quarter, and according to Sagawa, the company is still struggling to make inroads in the nonenterprise ATM market. "It came to the realization too late that it was in the entirely wrong market," he says. As for Tellabs and Ciena, although both companies rebounded since the breakup, Tellabs is garnering a great deal more investor enthusiasm. The stock has soared from a September low south of 40 to its current high in the 90s. And analysts remain enthusiastic about the company's prospects. Twenty-eight out of 29 rate the stock a Buy or Strong Buy. Tellabs would be a palatable, if pricey, target for a large data-communications company, but chances are the company will go it alone. It's one of the few companies that has been able to carve out a lucrative niche as a midsized combatant. NN number 1 on the screen: smartmoney.com