Alcatel has agreed to buy troubled networking vendor Newbridge Networks for $7.1bn in a bid to expand its product range to compete with Cisco and Lucent.
Newbridge will be merged with Alcatel's carrier data division: Pearce Flynn, president of Newbridge, will become head of the division. Newbridge gives Alcatel ATM switch products, which Alcatel is lacking. Alcatel could prove to be a lifeline to the ATM specialist, which put itself up for sale in November following a spate of poor financials.
Andreas Dohmen, executive vice president of Newbridge, told Network News: "We needed this deal because we were struggling to put enough feet on the street for project management and deployment of products in different countries. This is why we had to restructure and make redundancies last year."
"It's good news for our customers," he insisted, "because it's all about scalability. There is almost zero product overlap so customers need not worry about products being canned as a result of the takeover."
Pim Bilderbeek, analyst at IDC, said: "This is a sensible deal for both companies because Alcatel will get access to ATM Wan switches where it isn't strong. ATM isn't going out of fashion because it is still a big part of service providers' plans to install it in their networks. By 2003 it will have grown from a $4.5bn market to a $8bn market.
"It's good for Newbridge because it was too small for big customers and too big for the small guys. Newbridge needed a strong partner and the Siemens relationship wasn't really going anywhere."
While Bilderbeek predicted that Newbridge and Alcatel customers will not be adversly affected by the deal, he said: "It's likely that Siemens will now scrap its deal with Newbridge because it is head to head in competition with Alcatel. Siemens sales provides 10 per cent of Newbridge's revenue, so Newbridge will need to think about how to deal with this loss."
Dohmen argued: "It will be our number one priority to keep up the relationship with Siemens. It has already told me it is still interested. There's no reason why it shouldn't be."
A Cabletron spokesman quipped: "Newbridge has been like a frog waiting for its prince to come for years."
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