Alcatel Acquires Newbridge Networks for $7.1 Billion

After a strong buzz earlier this week, French communications giant Alcatel finally sealed the deal Wednesday
by buying Canadian mobile networking provider Newbridge Networks Corp. in a $7.1
billion stock deal.

Under the terms of the agreement, which has been approved by the boards of
directors of the two companies, Newbridge (NN)
shareholders will be asked to approve a merger agreement allowing for the
ultimate conversion of each Newbridge share into 0.81 Alcatel ADR.
Newbridge will merge with Alcatel’s Carrier Data Division (CDD) to form the
new Carrier Internetworking Division (CID), which will be headquartered in
Kanata, Canada.

With the deal, Alacatel (ALA)
looks to compete with major players such as Cisco Systems Inc. (CSCO)
and Nortel Networks (NT) in
commandeering the broadband/digital subscriber line market. Alcatel will use
Newbridge’s lead in the ATM/IP multiservice edge market and network
management, to provide a for managed enhanced services using DSL access
technology. Perhaps of greatest use to Alcatel will be Newbridge’s 670
Routing Switch Platform, which has been
successfully tested by major world-wide carriers.

Pearse Flynn will head the expanded team as president of Alcatel’s Carrier
Internetworking Division. He will also be appointed chief executive officer
of Newbridge. He will report to Krish Prabhu, chief operations officer of
Alcatel Telecom. Prabhu will oversee the integration process.

“During this past quarter, Newbridge achieved record revenue, streamlined
its cost structures, made substantial gains in the U.S. market, and
increased its WAN packet revenues. These have all served to put Newbridge on
a dynamic growth path in the broadband, next-generation market,” said Flynn.