Alcatel's acquisition seals Newbridge's fate

Alcatel has cemented its position among the top-tier networking vendors worldwide with the recent $11.5 billion ($US7.1 billion) acquisition of struggling Newbridge Networks, and the move is likely to prove especially beneficial for Australian users.

Joel Martin, senior analyst at IDC, said the Newbridge acquisition, coupled with its recent purchase of Xylan, had established Alcatel as a leader in the networking market.

"This acquisition strengthens Alcatel to compete with Cisco and Nortel," Martin told Computerworld. "Those three are really separating themselves from Lucent, 3Com, Siemens [and the other worldwide networking players]."

He added the acquisition completes Alcatel's product offering in voice and data communications, giving it a stronger sales story in the competitive carrier and enterprise networking markets.

The acquisition will immediately make Alcatel a leading player in the ATM (asynchronous transfer mode) equipment market. Newbridge holds about 25 per cent of that market, as do competitors Lucent Technologies and Cisco Systems, according to Alcatel's Web site.

After the merger, Alcatel plans to create a new carrier internetworking division (CID), based at Newbridge's existing headquarters in Canada.

The division will consist of Newbridge Networks and Alcatel's existing carrier data division, which includes the company's ADSL (asynchronous digital subscriber line), IP (Internet Protocol) and Internet-related equipment divisions, and is projected to have combined annual sales of more than $US2.5 billion.

It will be headed by Pearse Flynn, Newbridge's incumbent president and chief operating officer.

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

Alcatel spokesman Klaus Wustrack, said: "It helps us become a much more data-oriented company very quickly.

"You have a choice: you either develop it inside or, if you have a chance, you accelerate your move into it with an acquisition, and that's what we did."

At present, Alcatel's largest ATM switch can handle maximum data throughput of 22Gbits/sec, whereas Newbridge's 670 platform scales from 50 to 450Gbits/sec, Alcatel said.

IDC's Martin said Alcatel's acquisition would be particularly advantageous for local users because Australia has such a large ATM infrastructure.

Locally, Newbridge has more than 150 customers, including Cable & Wireless Optus (CWO), Telstra and Westpac, according to officials.

Paul Fraley, managing director of Newbridge Australia, said the Alcatel acquisition was necessary to boost Newbridge's opportunities in the high-end carrier market.

"For Newbridge to prevail we needed a partner to provide the power to move into the big end of the carrier market," he commented. "Also, with new carriers, we needed to be able to provide finance.

"These strengths are available through Alcatel."

Alcatel expects to have completed its acquisition of Newbridge by the second quarter, pending shareholder approval and an Alcatel board meeting on March 16.

The Alcatel deal ends several months of speculation about Newbridge's future sparked by its recent decision to hire an investment banker after the company issued several profit warnings in recent years.

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