Top Stories: Ascend Shows
How Far It's Come
By Kevin Petrie
Staff Reporter
11/17/98 4:30 PM ET
Last year, Ascend (ASND:Nasdaq) had a
nightmare of a time trying to integrate its merger
partner Cascade as well as fix screwy software.
Now the Alameda, Calif.-based
telecommunications supplier is keen to show how
far it has come.
After trading near 80 in early 1997, Ascend's
mishaps sent the stock down to as low as 23 late
last year. But management says it has learned to
proverbially chew gum and walk at the same time.
And it is ready to issue a challenge in the
burgeoning Internet-telephone market.
Next week, Ascend plans to release a key product
that shows the first spoils of acquiring Stratus
Computer. The product will use a technology
called "signaling system 7," or SS7, and act as a
gateway between phone networks and the Internet.
The gateway eases network congestion and trims
costs for carriers
Not bad since Ascend announced plans to acquire
Stratus for stock worth $822 million in early August
and completed the deal in late October. (Ascend
plans to divest Stratus' nontelecom businesses
shortly.)
Ascend likely will ship commercial units of the new
product by late December or early 1999,
according to Craig Johnson, principal of the PITA
Group consulting firm. Ascend officials declined to
comment on the announcement.
Johnson says the Stratus SS7 gateway product will
remove data traffic from the phone network and
place it on the Internet -- a necessary first step in
creating Internet-based phone service. Phone
companies have long used SS7 to control services
such as 800 toll-free calling on their networks.
Ascend is working to graft SS7 onto data networks
in order to make them reliable carriers of voice
calls.
Taking this first step "is fundamental to the
Ascend-Stratus acquisition," says Mike
Cristinziano with Gerard Klauer Mattison.
Cristinziano has not been briefed by Ascend on
this particular product.
Stratus represents a new challenge for Ascend. In
its last major transaction in June 1997, Ascend
paid $2.8 billion to acquire Cascade, a supplier of
large data switches for carriers. Despite early
management chaos, Cascade continued to sell its
products to its own loyal customers. By contrast,
Stratus offers little revenue now, but it promises a
great deal in technology it offers Ascend.
To be sure, Ascend faces competition from Cisco
(CSCO:Nasdaq), which in June shipped software
that performs roughly similar services, and Lucent
(LU:NYSE).
Cristinziano downgraded Ascend to a hold the day
after it announced plans to buy Stratus in August
because he expects a few hiccups with the Stratus
integration. But he is bullish on Ascend in the long
term.
For now, Stratus is adding some $50 million to
Ascend's total $450 million in revenue this quarter,
primarily by selling its computer servers to
telephone carriers. Cristinziano says carriers might
be slow to deploy the new Stratus product, as they
often are slow to adopt new technologies.
Tuesday afternoon, Ascend shares finished up 5/8
at 53 5/8. |
