<<LU has rationally evaluated the competitive situation. LU would prefer to follow the CSCO model of buying 10-15 startups/year with bleeding edge tech. But, LU realizes that strategy will take too much time and it needs to buy ASND for its tech and installed base now in order to become the preeminent data network provider worldwide before it is too late and its voice/circuit equipment is obsoleted faster than anyone expected.>>
I agree. LU wants/needs to move faster. The acquiring 10-15 companies approach leads to disparate technologies that have to be culled thru and integrated. This takes time - time that they may not have, as I suspect your last sentence above is correct.
<<LU and NT are sworn enemies. NT made its move and bought BAY in 6/98.>>
I just can't see BAY being a smart move for NT. Time will tell.
<<CSCO believes it can fly solo (with partnerships with European suppliers (ALA?)) while buying 10-15 startups/year.>>
Sticking with a proven strategy (for them) makes some sense. What else can they do?
<<LU is behind in data networking and international market. It covets ASND/Cascade tech (GX550 and next generations), installed base worldwide with largest telecoms/ISPs, and Silicon Valley expertise. LU has $100B market cap, arguably overvalued stock price to use as currency, and can very easily digest ASND for $15B after 10/1/98 pooling of interest restrictions are lifted.>>
I tend to agree with all of above. If LU can juice up it's growth, it is also arguably UNDERvalued, too. Interesting.
<<ASND wants to remain an indedependent company because it is well-positioned in the key profitable networking spaces and is only networker standing up to CSCO. But, ASND also realizes that NT, LU, CSCO, Siemens, ALA and ERICY will be formidable competitors over time. ASND could have 1-2 more very profitable years, but cumulative R&D, pricing and margin pressure will make it difficult over time.>>
Reluctantly, I have to agree here as well. I would like to see make it independently, but I think you could be correct.
<< Thus, ASND decided in early 1998 (after its stock price recovered) not to make acquisitions (why no start-up acquisitions in the last year?), keeps its cash/investments, and directs R&D to areas complementary to LU (e.g., no next generation GRF development).>>
Why no acquisitions? Well for one thing, until recently the stock price was low and integrating CSCC was a full year job. I'm not sure if I agree with you here, but it is something to think further on.
<<ASND has to appear to be strong and ready to compete as an independent company in order to maximize the sale price to LU.>>
Agree with the first part. The second part follows, but I am not sure that is their main motive. 2 more months should tell.
<<LU sees a worldwide telcom equipment market size of hundreds of billions of dollars as data replaces voice equipment over the next 5-10 years. $15B or $75/share for ASND suddenly becomes very reasonably. LU, ASND (and NOKIA?) get together and become the preeminent worldwide telecom supplier in the early 21st century. >>
I hope LU has that kind of vision. I have a hard time seeing this from their other recent acquisitions, especially Livingston. Yes, such a combo would be dominent.
<<CSCO continues to do well, but NT/BAY get left in the dust. TLAB/CIEN are the wild card.>>
Again, time will tell. CSCO has cracks. Will they widen or get patched?
<<If this scenario is correct, I believe the following events will occur in the next few months. ASND will want to keep its stock price from soaring in order to keep itself within an attractive price range for LU. As reflected in the 7/14/98 2Q98 conference call, ASND management will continue making conservative statements to analysts and will downplay/not announce new contracts (e.g., AT&T) to avoid stock runups.>>
This would seem to explain Ashby's conservatism.
<<If ASND really wants to remain independent, the opposite scenario will occur starting in 9/98. ASND management will start to pump its prospects/contracts and will announce some start-up purchases.>>
Agree here as well when you lay this all out. Question to anyone. Is there any time restriction on repeated use of 'pooling of assets'?
Why was David Misunas hired, if not to acquire or be acquired?
<<I welcome comments (pro and con) on this scenario. If you can, please be detailed so we can have a substantive discussion.>>
Detailed at 6:30 AM? I'll think more clearly later on.
<<It is, of course, speculation because who really knows what lurks in the hearts of LU and ASND management.>>
The shadow knows. <g> (Couldn't resist!)
<<Remember, almost every brokerage analyst who covers ASND has publicly stated that LU/ASND would be a killer combination. djane>>
And when you lay it all out, they do seem to need each other. I wonder if they both have that much common vision? |
