Newbridge Networks Corp, Ottawa, Canada-based data and telecoms equipment manufacturer, has reported its financial results which suggest that that the acquisition from Tandem Computer Corp of UB Networks Inc, for $96m in cash in January (CI No 3,068) was a mistake. This has seriously disrupted its plans to be both a telecoms and corporate data networking player. The results come as no surprise, as a profit warning was announced on 4 November. Newbridge superficially looks in reasonable shape with revenue growth for the quarter up a healthy 36.7%, though net profits fell by 7.6% to $40.9, and six month net dipped 1% to $86.3m on revenue up 44% at $611.3m. But the results are a reflection of the hugely successful part of its business, the Siemens AG/ Newbridge Asynchronous Transfer Mode alliance, rather than the business as a whole. It has three major businesses, the 31670 ATM and frame relay switch line, jointly developed and marketed with Siemens to telecoms carriers, its Time Division Multiplexers which are its original products, and its corporate networking business both with its home built Vivid switch routing product line, and UB’s switches and LAN products. The TDM line is growing slowly at 5% per year, and derives around $600m of Newbridge’s yearly revenue and the ATM telco order book is solid with major contracts signed with British Telecommunications, MCI Corp and others. UB Networks and Vivid switched routing business are a non-starter with revenues of only $45m in the quarter, when UB turned over $86m per quarter as a Tandem subsidiary. Some of the decline has been laid at the door of Cisco Systems Inc that stopped reselling UB products. But the failure of Newbridge’s planned UB turnaround comes at a time where Digital Equipment Corp has sold its networking business to Cabletron Systems Inc because to be a corporate networking player DEC needed a critical mass larger than it could achieve on our own. Newbridge has fallen victim to a data networking industry trend, with the decline of all the players that wanted to become end to end suppliers, as IBM Corp, Cabletron and Madge Networks NV have run in to trouble trying to compete on equal terms with the big players Cisco, Bay Networks Inc and 3Com Corp. Newbridge is apparently going to review the future of its corporate networking business, and will have sorted it out by February, which may involve selling UB off, or shutting further parts of it down, and will be looking at alternative ways of tackling the LAN business.
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