Newbridge Networks

» see newbridge.com as it lived, on the wayback machine

~ the eulogy ~

Alcatel announced on 23 February 2000 that it was buying Newbridge Networks Corporation for $7.1 billion in stock. Light Reading ran the news the same day and recorded what the market thought of it: Alcatel's own share price tumbled almost nine points to $43 and three quarters. The paper's reading was that Alcatel wanted two things, a respected line of ATM equipment and a way into the United States, and that it was buying both at the exact moment such things cost the most.

The deal closed three months later. On 25 May 2000 the Superior Court of Justice in Ontario approved the plan of arrangement, every regulator had cleared it, and Alcatel owned all of the voting and equity shares. Newbridge holders could take Alcatel ADSs or exchangeable shares convertible into ADSs over the following five years. The same day, Pearse Flynn, the president and chief operating officer, signed a Form 15 terminating the company's registration with the Securities and Exchange Commission. The box on that form asking for the approximate number of holders of record reads: one (1).

Nobody bought a Newbridge box the way a person buys a thing. The annual report describes the market as the world's 350 largest service providers along with ten thousand corporations and government bodies, and the list stops there. I spent the late nineties dialing into a Turkish ISP from a bedroom in Ankara, several floors below any name printed on a chassis, paying a monthly bill into an industry that ordered its switches by the rack.

~ the dossier ~

~ what kanata built ~

Terry Matthews started Mitel with Michael Cowpland in 1972 and lost control of it after British Telecom took a controlling interest in the mid-eighties. Newbridge was incorporated in June 1986 in Ontario under the Canada Business Corporations Act, and it went after a different customer: not the office that buys a phone system but the carrier that owns the lines between offices. The MainStreet family multiplexed circuits and the MainStreetXpress line switched ATM cells, with the 46020 network management system sitting on top and running the lot from one screen.

It worked on a scale that is easy to miss now. Sales went from Cdn$800.5 million in the year to April 1995 to Cdn$1.79 billion in the year to 2 May 1999, with a 49 percent jump in fiscal 1997 alone. The company owned its headquarters at 600 March Road in Kanata along with a sales and logistics site in Newport, Wales, leased research labs as far apart as Rennes and Vancouver, and sold into more than a hundred countries. At the last count before the sale it had 6,530 employees, and the filing notes that not one of them was covered by a collective bargaining agreement.

~ the affiliates ~

The unusual part of the model was the ring of companies around it. The annual report calls them Newbridge Affiliates and puts the number at over twenty: separate startups building networking technology next to the parent, with Newbridge holding an equity stake in each. It was a way of buying optionality on a dozen technical bets without putting any of them on the balance sheet, and it meant the Kanata campus was really a cluster rather than a company.

Not every bet paid. The 1997 purchase of Ungermann-Bass, a Californian local-network vendor already in trouble when it arrived, produced Cdn$181.4 million of restructuring costs in fiscal 1998 and another Cdn$118.0 million the year after, and Newbridge wound down the Layer 2 switching line it had bought. A separate class action over statements made in 1994 was settled in October 1998 for an expense of Cdn$2,642,000.

~ the siemens problem ~

Since March 1996 Newbridge had run a deep alliance with Siemens, with joint branding under the MainStreetXpress name and Siemens selling Newbridge gear to service providers on three continents. By 2000 the two companies' ATM ranges had grown into each other. Siemens sold the 36170 edge switch, which Newbridge made; Newbridge's smaller access switches came from Seabridge, an Israeli firm the two had once owned together and Siemens now owned outright.

Alcatel's purchase therefore handed one of Siemens' main rivals the job of supplying part of Siemens' own product line. Thomas Rambold, the chief technology officer of Siemens' network division, told Light Reading it was business as usual and that clearing up the ownership question was a good thing. He would not comment on the suggestion that Ericsson and his own employer had been bidding against Alcatel. The MainStreetXpress 36170 kept selling for years afterward under an Alcatel product number, which is what happens to good equipment when the company behind it stops existing.

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