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

To: pat mudge who wrote (11193)	5/6/1999 6:34:00 AM
From: Glenn McDougall	Respond to of 18016

Newbridge pounded Takeover talk, profit warning prompts investors to flee By KEVIN BELL, Business Editor, Ottawa Sun IT WAS a rough-and-tumble day for Newbridge Networks Corp. yesterday as investors punished the company for yet another warning of a profit shortfall. The stock tumbled by almost 22% on the Toronto Stock Exchange, but analysts said the day could have been rougher for the company. Renewed speculation that Newbridge is more attractive as a takeover target because it is cheaper likely softened the blow, they said. "I was expecting more to come off" the stock price, said Rob Mac- Lellan, an analyst with CT Securities. "It could weaken substantially over the next couple of days." The share price crashed by $11.65 to close at $41.95 after heavy trading on the Toronto Stock Exchange. At one point, shares changed hands at $39.05. "I think the only reason it is not off even more is the possibility that a takeover looms ever larger here," said Paul Sagawa, an analyst with Sanford C. Bernstein & Co. Newbridge reported late Tuesday that it expects its fourth-quarter profits will be as much as 9cents a share below analysts' consensus estimates of 21cents. It was the fifth time in eight quarters it has warned it would not meet expectations. The company said orders for its networking products were strong, but it could not make and ship enough communications equipment to meet demand. CEO Alan Lutz said the company needs one or two quarters to fix the problem and catch up with a backlog of orders, but some analysts were skeptical. "I don't think there are short-term manufacturing problems," Sagawa said. "This is a fundamental manufacturing and product-line problem. It can't deliver its products to customers on a timely basis." Duncan Stewart, a partner at Tera Capital Corp., said people will be calling for Lutz's head. "It may not be his fault, but it is certainly his responsibility." But Patrick Houghton, an analyst with Sutro & Co., said investors are underestimating the company's strengths. Newbridge is reporting a significant increase in orders for its ATM products, which should eventually translate into higher revenue, he said. But Newbridge's late admission that it is having trouble turning orders into deliverable goods is a serious worry, he said.

To: pat mudge who wrote (11193)	5/6/1999 6:38:00 AM
From: Glenn McDougall	Respond to of 18016

Investors beat up on Newbridge Jill Vardy Financial Post OTTAWA - Shares in Newbridge Networks Corp. fell 22% yesterday after the company warned Tuesday of much lower than expected earnings in its fourth quarter. Stock in the Ottawa-based maker of telecommunications equipment company plunged $11.65 to $41.95 in Toronto and $8 1/16 to $28.75 (US) in New York on news that production problems prevented it from meeting all the orders for its equipment. Newbridge now estimates that it will earn 12¢ to 14¢ (US) a share on revenue of about $460-million in the fourth quarter, which ended on Sunday. At least five analysts reduced their recommendations on the stock, despite company assurances that orders for its flagship telecommunications switches jumped 50% in the quarter alone. A whole series of problems combined to prevent Newbridge from filling those orders, said Alan Lutz, president and chief operating officer. He said the company will solve those problems over the next two quarters. Details of those adjustments and the final fourth quarter numbers are to be available on June 1. Mr. Lutz told analysts in a conference call Tuesday that he was sorry his company was forced to issue the early earnings warning -- the fifth in its past eight quarters. "We're deeply disappointed that this situation has occurred and frankly on behalf of the management team I apologize for any impact on your credibility with your customers that this pre-announcement causes," he told the analysts. Some analysts sounded frustrated that Newbridge, starting the current quarter with millions in unfilled orders, could not paint a more optimistic picture for the early part of this fiscal year. "Shouldn't you come out fighting instead of trying to be conservative? If it really is good news we want to hear that," David Beck, analysts at TD Securities, told Mr. Lutz on the conference call. Mr. Lutz's view: "Put yourself in my position. I just had the hell beat out of me." Others sought solace in the signs that demand for Newbridge's asynchronous transfer mode (ATM) equipment is stronger than predicted. "There are three legs to this stool: demand, products to address that demand, and execution. The bad news is that execution is a real problem. The good news is that the other legs of the stool look pretty strong," said Paul Silverstein, analyst at Banc-America Robertson Stephens in New York. Mr. Silverstein said the company has a real and serious production problems. But he's retaining his 'buy' recommendation on the stock, assuming those problems will be fixed. "This is a serious problem. It's not trivial. But if you got to choose your poison, this would be the problem to pick," he said.

To: pat mudge who wrote (11193)	5/6/1999 8:28:00 AM
From: bay aufarb	Read Replies (2) \| Respond to of 18016

Something fundamental in this concern regarding backlog doesn't make sense to me. If a firm is one month behind in filling orders, that would be picked up in the following quarter. If they remain one month behind consistently, each quarter will still reflect three months in sales. Only the first quarter in which they fall back should reflect a significant shortfall. I do understand that if growth in sales is exponential month over month, than the effect of a one month backlog may be significant but in the long run I would expect that it would all even out. Am I missing something?