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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (30851)	5/12/1999 7:05:00 PM
From: Richard P. Roberts	Read Replies (1) \| Respond to of 45548

05/12 16:07 Newbridge Networks must decide if it will stand alone By Lydia Zajc TORONTO, May 12 (Reuters) - Like the wallflower at a high school dance, Newbridge Networks Corp. <NNC.TO> <NN.N> has stood by demurely while other networking and telecommunications companies have rushed to pair off. In the past year, nearly all of Newbridge's rivals have announced mergers to meet accelerating demand that voice, information and video signals be pushed down one line instead of several. Now, Newbridge faces a crucial decision: select a partner or go it alone. The choice will have to be made soon because the nature of Newbridge's business is changing rapidly. "The critical architecture decisions about the networks of the future -- as well as who the strategic partners are -- are going to be made in the next 12-18 months," predicted industry analyst Peter Bernstein, an analyst at New Jersey-based Infonautics Consulting. In January, the world's largest maker of telephone equipment, U.S.-based Lucent Technologies Inc. <LU.N>, agreed to buy Ascend Communications Inc. <ASND.O> to establish a beachhead in communications networks. Cisco Systems Inc. <CSCO.O>, the largest maker of computer networking equipment, telecoms equipment maker Nortel Networks Corp. <NT.TO> <NT.N> and German industrial group Siemens AG <SIEG.F> have all been snapping up partners. That's left Kanata, Ontario-based Newbridge, a purveyor of the hot asynchronous transfer mode (ATM) telephone technology, as one of the last major stand-alone companies. The other is networking equipment maker 3Com Corp. <COMS.O> "They're kind of the odd person out right now," Bernstein said. "I don't know that the world is going to support an independent networking (firm) like Newbridge, just because concentration in the business is dictating that you need to be part of these holy alliances." Rumors about possible dance partners for Newbridge have proliferated in the past few months. Observers have fingered Siemens, a partner with Newbridge in several ventures, Sweden's Telefon AB L.M. Ericsson <LMEb.ST>, and U.S.-based Tellabs Inc. <TLAB.O>. Last week's tumble in the Newbridge share price spurred further speculation as billions of dollars were slashed from the company's market valuation. On May 4, the company posted a profit warning that took the market by surprise. This was the fifth time in eight quarters Newbridge has either failed to make consensus estimates or warned the street that its earnings would disappoint. On May 5, the shares plunged 27 percent to a recent low of C$39.05 and then recovered slightly by the close. On Wednesday afternoon the stock was up 20 Canadian cents at C$46.40 on the Toronto Stock Exchange. Analysts agree that two major stumbling blocks prevent potential suitors from asking for Newbridge's hand. First, founder and Chief Executive Terry Matthews must be persuaded to relinquish his stake of about 20 percent. Newbridge spokesman Paul Goyette said Matthews would present any strong offer to shareholders. "Terry has traditionally said ... that he wasn't stupid and that if the right offer came at the appropriate time, and represented fair market value for the company and represented value for shareholders, that he would do what he has to do," Goyette said. "But it would seem that that offer has not come along." Robert MacLellan, analyst at CT Securities, pointed out that it's tough for company founders to remain detached. "The same passion that created the business is sometimes the same passion that can stand in the way of its disposition." A second obstacle is Newbridge's alliance with Siemens, which could play the role of white knight, MacLellan said. However Siemens has ignored Newbridge to date. Instead it has been making deals with small U.S.-based data networking companies, and has deepened its relationship with 3Com, Bernstein said. "They're busy buying up a constellation of start-ups," which are cheaper and have hotter technology, he said. MacLellan said he thinks Newbridge first and foremost will make an attempt to survive as a single. Failing that, he said, it will partner up with Siemens. Within 18 months, "there's a chance that Siemens will either go away or take an equity stake in the company. If Siemens goes away, the odds of (Newbridge) being acquired go up, if there's any buyers left at that point in time." ($1=$1.46 Canadian) ((Lydia Zajc, Reuters Toronto Bureau (416) 941-8109, or e-mail