As Takeover Talk Nags Street
Dow Jones Newswires
Shares of Ascend Communications Inc. lost 14% in a blizzard of sell orders
Friday as talk heated up that the networking company may acquire Stratus
Computer Inc.
Some analysts and investment bankers groaned at the idea of such a deal,
saying the two companies didn't fit. But talk on Wall Street persisted that
there was indeed an imminent agreement. On Friday, the San Jose Mercury
News reported that Ascend would buy Stratus for about $800 million next
week. Neither company would comment about the possibility of a deal.
Shares of Ascend, which itself has been considered a prime takeover
candidate, plunged $7.03125 to $44.46875 on the Nasdaq Stock Market and
was the most-active issue. Shares of Stratus, meanwhile rose 75 cents to
$28.75 on the New York Stock Exchange.
With Alcatel-Alsthom SA gobbling up DSC Communications Corp. and
Tellabs Inc. recently announcing a deal to buy Ciena Corp., analysts say
small- and mid-sized makers of telecommunications and networking
equipment will have a difficult time remaining independent. The two
converging sectors have long been dominated by giants such as Lucent
Technologies Inc., Canada's Northern Telecom Ltd., Sweden's L.M.
Ericsson and Cisco Systems Inc.
Indeed, rumors have swirled around Ascend, a leader in the sizzling market
for remote-access servers, which allow users to dial into company networks
and Internet services. Ascend has recovered from last year's dumps, when
software problems caused product malfunctions and its merger with
Cascade Communications Corp. sapped management resources.
Earlier this week, Ascend was one of three companies rumored to be
interest in Stratus. Also, analysts recently downplayed rumors that Ascend is
interested in acquiring Advanced Fibre Communications Inc., a developer of
equipment that boosts the capacity of telephone networks.
Looming over the networking-equipment sector is the specter of October,
when Lucent will be freed from the shackles that have kept it from making a
big acquisition.
When Lucent was spun off from AT&T Corp. in September 1996, the deal
was tax-free -- good for shareholders, but bad in that it kept Lucent from
using an accounting method known as "pooling" to make deals. Acquisitive
companies like pooling because it lets them use their stock as currency and
avoid accounting charges that would decrease future earnings. But if a
company pools within two years of being spun off, it risks losing its tax-free
status as a spinoff.
Lucent has stated its intent to become one of the top two data-networkers,
leading analysts to expect the company to make deals left and right as soon
as it can. But since Lucent's rivals also know October is looming,
pre-emptive deals are always a possibility. |
