Newbridge bid to get back on track falters

Results Profit for second quarter falls eight per cent despite C$285 million gain from sale of subsidiary ACC.

Newbridge Networks' attempt to claw back some financial credibility5 million gain from sale of subsidiary ACC. has been thwarted by an eight per cent dip in profits as speculation mounted over a possible takeover.

The results for the second quarter ended 1 November revealed income had dropped to C$53.3 million from C$57.9 million for the same period last year.

Figures included a C$128 million gain on the sale of the vendor's affiliate company ACC, bought by telecoms giant Ericsson in September for C$285 million. Turnover rose to C$456 million from C$432 million last year.

The company was also hit with a C$6 million one-off charge for Asia Pacific resource relocation and C$61 million for the write down of unspecified investments, on which the company declined to elaborate.

Newbridge's results were released as rumours escalated that Siemens AG could be a possible buyer. The networking vendor already has a product development alliance with Siemens.

However, a Newbridge representative refuted the speculation, stating the vendor was not in discussions with anyone.

Alan Lutz, president and chief operating officer at Newbridge, said the relationship with Siemens has been rejuvenated over the summer and had 'never been stronger'.

The vendor was plagued with problems in its 1997 second-quarter results, which showed a significant drop in revenue and earnings, mainly as result of Newbridge's ill-fated takeover of UB Networks in January 1997 (PC Dealer, 3 December 1997). This was followed in December by Newbridge laying off 280 staff worldwide.

Lutz said: 'The number one goal is to restore credibility with the investment community by demonstrating consistent and improved financial performance.'

Inventory levels for the second quarter were reduced by C$20 million, while the vendor's cash reserves grew to C$761 million from C$499 million in the comparable quarter last year.

The vendor's days of sales outstanding had also consistently improved from 99 days two quarters ago to 82 days.