Alcatel builds a New Bridge

Alcatel builds a New Bridge

Hanover, Sydney and San Francisco - Alcatel SA has announced it is to acquire Newbridge Networks in a deal valued at $US7.1 billion, but it is still to be revealed what this will mean for the local channel.

Nick Verykios, chief marketing officer at LAN Systems, exclusive distributor for Alcatel's Internetworking division (IND), said it hadn't yet been told by Alcatel how Newbridge Networks' products would be delivered to the channel, and was eagerly waiting to find out.

Verykios said that for Alcatel, the acquisition would mean a greater range of customers and an extensive range of data products for the high-end carrier space.

"We can only hope that it is included as part of the Alcatel product range which does come through the channel," Verykios said.

An Alcatel spokesperson said for the time being, it would be "business as usual" for channel operations. Alcatel and Newbridge were unable to add further details about how the channel would be structured before ARN went to press, but Alcatel's spokesperson said it was hoping to be able to comment further in the near future.

Paul Fraley, managing director of the South Pacific operations for Newbridge Networks (Australia) said it was still too early to say what the channel implications will be. "We haven't had a chance to sit down with the local people and decide what the channel strategy will be." Fraley added that its channel has been a strategic component for Newbridge and it would be high on the list in discussions. "It should open up opportunities for resellers . . . "The acquisition agreement, which has been approved by the boards of both companies, calls for Newbridge shareholders to receive 0.81 per cent of Alcatel's American Depository Shares (ADS) for each of their share in Newbridge, the companies said in a joint statement. An ADS is a certificate issued in the US representing a portion of a share in a non-US company.

The value of the deal cited by the companies is based on Alcatel's closing share price yesterday, a premium of 19 per cent over the $39 per share closing price of Newbridge stock the same day.

After the merger, Alcatel plans to create a new Carrier Internetworking Division (CID), based at Newbridge's existing headquarters in Kanata, Canada. The division will consist of Newbridge Networks and Alcatel's existing Carrier Data Division, which includes the company's asynchronous digital subscriber line (ADSL), Internet Protocol (IP) and Internet-related equipment divisions.

Alcatel said the Newbridge acquisition represented a faster way to get into the market for high bandwidth data networking equipment than developing its own products.

Currently Alcatel's largest ATM switch can handle maximum data throughput of 22G bps (bits per second), whereas Newbridge's new 670 platform scales from 50G bps to 450G bps, Alcatel said.

Pending shareholder approval, Alcatel hopes to complete the deal by the end of the second quarter of this year.

Newbridge has also reported third fiscal quarter earnings for the period ending January 30, which were (excluding one-time charges) $C33.9 million ($US23.2 million), down from $C47 million recorded in the same period last year. Earnings per share were 13 US cents, two pennies more than predicted by a consensus of analysts polled by First Call/Thompson Financial.

Revenue for the third quarter totaled $C520.6 million, up 16 per cent from $C450.7 million posted in the same quarter last year.

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