Boston Globe. New owner will break up Stratus
boston.com
By Ronald Rosenberg, Globe Staff, 08/04/98
Stratus Computer Inc., a pioneer maker of failsafe computer systems
that was founded 17 years ago, will soon be dismantled following its
$843 million acquisition by Ascend Communications Inc.
The merger of Stratus of Marlborough and
Ascend of Alameda, Calif., was announced
yesterday after being widely rumored last
week. It is the latest in a string of deals among
computer networking and telecommunications
companies as the Internet explosion leads to a
convergence of voice and data
communications.
Ascend, a maker of data networking switches,
is buying Stratus primarily for its technology and
products sold to telephone carriers to manage
their networks and blend voice and data traffic. That business unit of
Stratus - one of four - had $220 million in revenue last year.
After the $843 million stock swap is completed in the late fall, Ascend will
sell Stratus' three remaining business units - with $466 milliion in 1997
revenue - as well as Stratus's corporate name.
''We have had several active inquiries from companies looking into what
we plan to divest. I just cannot name them now,'' said Bruce Sachs,
Stratus president and chief executive. Sachs had been shifting the
company into telecommunications since becoming chief executive in May
1997.
The acquisition will lead to a series of employment changes at Stratus.
About 500 jobs will be terminated, including 350 that were targeted last
month when the company announced a 20 percent drop in revenue for the
second quarter.
That would leave Stratus with about 1,900 employees. Only 400 to 450
of those employees will become part of Ascend, while the other 1,500
would join the company or companies that eventually acquire the bulk of
Stratus, said Sachs. Sachs said that of the 500 who will lose their jobs -
half of them in Massachusetts - some will be considered for new jobs at
Ascend, which has its East Coast headquarters in the Westford offices of
the former Cascade Communications Corp., a computer networking
company Ascend acquired last year for $3.7 billion.
After the Stratus acquisition and divestitures and some additional hiring by
Ascend, the California company will have more than half its work force in
Massachusetts, Ascend said.[I'm glad ASND isn't afraid of cross-country mergers.]
To buy Stratus, Ascend will swap 0.75 of its shares for each of Stratus'
24 million outstanding shares, excluding options. Based on Ascend's
closing price yesterday of46 13/16, up 2 11/32, the deal values Stratus at
$35.11 a share, which is slightly higher than Stratus' closing price
yesterday of $33.75. Stratus shares rose 4 7/8 in very heavy trading
yesterday.
The premium has dwindled considerably since last week when rumors of
a pending deal leaked out, causing Stratus shares to rise and Ascend's to
fall.
Analysts who were skeptical last week were more positive about the deal
yesterday. The acquisition of key Stratus technology will enable Ascend
to better compete against larger rivals such as Lucent Technologies Inc.,
said analysts.
Ascend is mainly buying Stratus for its products and services for
telephone carriers. It is a leading supplier in that market, selling to 27 of
the 30 largest players. Stratus sells them specialized computers and
software that run Signaling System 7 technology, or SS7, which enables
phone companies to route voice and data traffic over data networks and
to incorporate ''value-added'' services such as call forwarding, credit card
verification, and 800 calling.
''We can leapfrog the competition by several years,'' said Mory Ejabat,
Ascend president and chief executive. ''We can now expand into new
areas, become an Internet backbone provider and take our products
across the country and into Europe.''
This story ran on page C01 of the Boston Globe on 08/04/98.
c Copyright 1998 Globe Newspaper Company.
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