Evergreen Analyst Sees Lucent Buying Ascend:
Bloomberg Forum
Bloomberg News
November 6, 1998, 11:07 a.m. PT
Evergreen Analyst Sees Lucent Buying Ascend: Bloomberg Forum
Boston, Nov. 6 (Bloomberg) -- Lucent Technologies Inc., the
biggest telecommunications equipment maker, probably will buy
computer networking-equipment supplier Ascend Communications
Inc.
in an effort to grab technology Lucent doesn't have, said
Evergreen Investment Management analyst John Rutledge.
Lucent needs Ascend's large data-switching products so it
can better compete in the networking market against Cisco Systems
Inc., the largest maker of switches, routers and other products
used to link computers into networks, said Rutledge, who analyzes
the computer hardware industry for Boston-based Evergreen.
''There's a 50 percent chance Lucent buys Ascend in the next
six months for a substantial premium,'' Rutledge told the
Bloomberg Forum. ''Ascend would make an ideal acquisition target
for Lucent.''
Lucent probably would pay at least 35 percent more for
Ascend than its current price of 51 1/4, said Rutledge, whose
company owns more than 500,000 Ascend shares. Ascend's market
value is now about $11 billion.
Revenue at Alameda, California-based Ascend, the fifth-
largest maker of networking equipment, will increase 40 percent
over the next four quarters, Rutledge said, while the company's
stock trades at about 30 times next year's expected per-share
earnings.
That makes Ascend a cheaper stock than Murray Hill, New
Jersey-based Lucent, Rutledge said. Lucent trades at about 43
times fiscal 1999 earnings, even though its sales will increase
just 18 percent in the next four quarters, he said.
Time Saver
Lucent would be better off buying Ascend than trying to
create the switches itself because of the time saved, Rutledge
said.
''Technology changes faster in data networking than any
other'' part of the computer industry, he said.
Speculation that Lucent might buy Ascend isn't new. The New
York Times reported on Sept. 13 that Lucent, spun off from AT&T
Corp. two years ago, might want Ascend.
As for the prospects for technology stocks, ''there's still
considerable room for computer-oriented companies to outperform''
the broader market this year, Rutledge said. Among his favorites
are International Business Machines Corp., Sun Microsystems Inc.
and Gateway 2000 Inc.
Stocks of computer chips makers and their suppliers won't
outperform the market as the recent rally from the October lows
loses steam, Rutledge said. |
