Very interesting tidbits from the Boston Globe on ASND/SRA [see middle]
boston.com
Stratus deal expected to be
announced today
Calif.-based Ascend seen buying
Marlborough firm in deal estimated at
$800m
By Ronald Rosenberg, Globe Staff, 08/03/98
Ascend Communications Inc. is expected to announce this morning that
it will buy Marlborough-based Stratus Computer Inc. in a stock deal
estimated at $800 million, according to a person close to the negotiations.
An exact price could not be learned last night, but the directors of both
companies approved the deal over the weekend, the person said. The
market value of Stratus's outstanding shares was nearly $807 million,
based on its closing price of 28 7/8 Friday.
The anticipated acquisition is just the latest in a flurry of deals as
companies jockey for position in the rapidly consolidating
telecommunications industry, the result of changes in regulations and
technology that have thrown open the previously separate local,
long-distance, and cable television markets. The buyouts have narrowed
the number of service providers - including last week's agreement by Bell
Atlantic Corp. to buy GTE Corp. for more than $50 billion - and
equipment makers like Ascend.
For Ascend, a fast-growing maker of data-switching gear based in
Alameda, Calif., the takeover of Stratus would come nearly 15 months
after it spent $3.7 billion to acquire Cascade Communications Inc. of
Westford, one of Massachusetts's fastest growing telecom companies.
Unlike the Cascade deal, which immediately expanded Ascend's product
line and helped boost earnings, the pending purchase of Stratus is
considered more controversial. Since rumors of the deal first surfaced
early last week Ascend shares have dropped 14 percent, closing Friday
at 4415/32.
Analysts said it is not clear why Ascend would buy Stratus, a maker of
fault-tolerant computers used mainly in the telephone, banking, and
securities industries, rather than form a partnership to exploit the telecom
technology Ascend covets.
A person close to the negotiations said Ascend's interest in Stratus began
this year when a consortium of companies was formed to improve the
flow of phone traffic over the Internet. The group, led by Stratus, includes
Ascend, 3Com Corp. and Bay Networks, both of Santa Clara, Calif.,
Cisco Systems Inc. of San Jose, and MCI Communications Inc. of
Washington, D.C.
Stratus, which sells its fault-tolerant computers to 27 of the world's 30
largest telephone companies, has developed computer technology that
would divert telephone calls bound for the Internet from busy voice
telephone switches. Voice networks are inefficient handlers of data calls;
that's because data calls such as Internet connections tend to last much
longer - 20 minutes to 1 hour or more - than typical voice calls.
By using lower-priced computers - Stratus's computers - the goal of the
consortium is to free up voice switches and use data switches with
high-speed data computers to create a new Internet ''backbone.''
During those consoritum sessions, Ascend executives reportedly got to
know the the Stratus team. ''Ascend got a close look at Stratus - inside
and out,'' said the source.
But Stratus, the last major independent computer maker in
Massachusetts, has struggled financially. Last month Stratus said it lost
$10 million in the the most recent quarter along with a 20 percent plunge
in sales, due largely to a downturn in demand for its computer products in
Asia. The combination prompted the 17-year-old company to cut 350
jobs - 15 percent of its work force - and take a $20 million charge against
earnings. Recently, Stratus said it expects another 50 people to leave the
company in the company months through attrition. Stratus will then
employ about 2,000, half in Massachusetts.
This story ran on page B04 of the Boston Globe on 08/03/98.
c Copyright 1998 Globe Newspaper Company.
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