Newbridge Networks' stock climbed nearly 13 percent today after a Wall
Street analyst said he believed several telecommunications equipment firms
are seriously considering buying the struggling Canadian networking
Shares of Newbridge jumped 2.75 to 24.25 as 2.6 million shares changed hands in trading today.
SoundView Technology Group analyst Chandan Sarkar said two or three
telephone equipment makers are thinking about acquiring Newbridge and that
a buyout could occur within 90 days. He declined to state who the suitors
are, but said his information came from industry sources.
Acquisition rumors have escalated since Newbridge
executives said last month that they were open to a takeover bid, following the
company's seventh profit warning in the last 11 quarters.
Media reports in the past month have speculated that European wireless leader Ericsson, Japan's Fujitsu, German networking firm Siemens, U.S.-based networker Tellabs and others might be interested in acquiring Newbridge.
Sarkar, however, believes that Tellabs has dropped out of the running after
buying Salix Technologies for
$300 million last week.
A Newbridge spokesman declined to comment, saying the analyst report was
Sarkar today also said Newbridge is having a good
sales quarter and that telecommunications firms that are testing
Newbridge's new high-end networking
gear are giving it positive reviews.
Nevertheless, Sarkar said the rise in Newbridge's shares surprised him.
"Investors are bargain-hunting at year end, and this is one of the big
underperformers," said Sarkar, who rates the stock a "strong buy." Goldman
Sachs and Hambrecht & Quist rate the stock as a "market perform."
Newbridge stock has traded as high as 39.87 and as low as 14 in the past
The company was a leader in the networking market a few years ago but has
since been surpassed by rivals Cisco Systems, Nortel Networks and others in
both revenue and new technology, analysts say.
Several high-level Newbridge executives have left, including president Alan
Lutz, following the company's earnings warning in early November. New
president Pearse Flynn has since reorganized the company by slashing 700
jobs, and outsourcing its manufacturing and customer service operations to cut costs.
Newbridge is still a leader in asynchronous transfer mode (ATM) technology,
which sends voice and data signals over networks at high speeds. The
company sells ATM-based high-speed routers and is developing products in
the emerging high-speed Internet access market, such as Internet protocol (IP)
switches, broadband wireless and digital subscriber line (DSL) technology.
Struggling networking firms, such as Newbridge and 3Com, have long been
rumored to be acquisition candidates. Speculation has been fueled by
several mergers during the past year between telephone equipment makers and
networking companies as they race to build technology that merges voice and
data on a single network. Since 1998, for example, Nortel purchased
networking firm Bay Networks, and Lucent bought networking firm Ascend
Analysts have speculated that the remaining unattached telephone equipment
makers--such as Alcatel, Ericsson, Nokia and Siemens--covet data networking
equipment because they want to build the new telecom technology.