Alcatel poised to buy Newbridge

Alcatel is in 'serious' talks to buy Newbridge Networks, according to the Canadian media, which has claimed the telecoms giant is the only remaining potential buyer after Ericsson and Siemens withdrew.

Alcatel is in 'serious' talks to buy Newbridge Networks, according to the Canadian media, which has claimed the telecoms giant is the only remaining potential buyer after Ericsson and Siemens withdrew.

Neil Sturgess, managing director of Newbridge reseller Decorum Networks, was not surprised by the news. "I have been expecting a telecoms vendor to buy Newbridge for the past 12 to 18 months," he said.

If the French telco maintains Newbridge's channel strategy the acquisition should not harm resellers, he said. "We'll have to see what Alcatel says, but such moves do not usually have a detrimental effect on resellers."

Acquisition speculation has grown steadily since November, when Newbridge announced a profit warning for its second-quarter results. Chief executive Alan Lutz and other senior executives quit the same day that the results were published.

Although replacement chief executive Pearse Flynn was optimistic about the vendor's future, Newbridge was known to have hired an investment banker to help it find a buyer.

Alcatel has an aggressive strategy to break into the north American market. Last month, the telco launched the Omni-PCX 4400 range of IP communications exchanges, created by its acquisitions of US firms Xylan and Packet Engines.

Paul Strauss, analyst at market researcher IDC, said a buy-out makes sense, but "Alcatel needs to acquire router companies". "Alcatel needs to acquire terabit and gigabit router companies or optical networking firms, but ATM is not dead," he said.

Newbridge has issued profit warnings in six of its last 10 quarters, but a report by analyst The Yankee Group into ATM wide area network switching in 1999 gave Newbridge the number one position with 26 per cent market share.

Newbridge was scheduled to announce its third-quarter results yesterday, and industry observers expect an announcement about its acquisition to be made at the same time. Neither Newbridge nor Alcatel would comment on the speculation.