|
NETWORKING STOCKS(Briefing): Investors are reacting with some disappointment to a Wall Street Journal report that Swedish telephone company LM Ericsson Telephone Co. (ERICY 26 5/8 +3/4) does not have the appetite for a networker the size of either Ascend Communications (ASND 49 5/8 -3/4) or 3Com Corp (COMS 26 5/8 -5/8). Instead, the company appears more interested in expanding into this arena via a serious of smaller acquisitions. In an interview, the company's executive vice president in charge of its telecommunications business confirmed that it has already begun talks with three companies in the networking arena, each worth several hundred million dollars. In total, ERICY is said to be looking at ten U.S. networking companies. While 3Com had been at the bottom of many networking analysts' lists as a potential takeover candidate (due in large part to its high consumer exposure through its modem business), Ascend was clearly thought to be the type of target that Ericsson might be interested in. At one point, Ascend probably was on ERICY's list, but it appears that the company has come to the realization that such a prominent name would command more of a premium than ERICY is willing to pay, particularly following the recently announced Nortel agreement to acquire Bay Networks (BAY). Instead, ERICY will focus on acquiring what it refers to as start-up networking companies. These comments have put shares of smaller-cap networking names such as Shiva (SHVA 9 11/16 +1), PairGain (PAIR 14 7/8 +15/16), and Fore Systems (FORE 23 7/8 +15/16) back in play this morning. It appears that Volpe Brown likes the chances of a PAIR buyout, as the firm has raised its rating on the stock from "neutral" to "strong buy." For a list of stocks that are thought by Wall Street professionals to be the top takeover candidates, see the latest StreetBeat |
