Excerpts from The New York Times (Tuesday, Jan. 12, 1999) under the title "Lucent to Buy Kenan for $1.45 Billion, but Is Mum on Possible Acquisition of Ascend," by By BARNABY J. FEDER and LAURA M. HOLSON:
Still, it was not the primary deal on investors' minds. The drop in Lucent shares was driven by nervousness about a possible deal with Ascend. Based on current valuations, such a deal would be 10 times pricier than the Kenan acquisition.
Speculation has been rampant for more than a year that Lucent might someday buy Ascend as it prepares to take on Cisco Systems, the giant of data networking. As data networks like the Internet and phone networks converge so that the same services can be offered over both, newcomers like Cisco and Ascend are increasingly competing directly with traditional telecommunications equipment makers like Lucent and Northern Telecom.
Lucent is continuing its talks with Ascend Communications, which were first reported in The Financial Times, although it is not known if or when an announced deal is likely, people close to the talks said.
The companies have had talks over the last several months, but Ascend had always asserted it could remain independent. In a recent October conference call with analysts, Mory Ejabat, the president and chief executive officer of Ascend, evaded the topic of a buyout and said his company was then not having talks with Lucent executives.
"It was kind of like saying I have not had sexual relations with that woman Monica Lewinsky," said Paul Sagawa, a senior research analyst at Sanford C. Bernstein, who took part in the conference call. "It was so clearly a Clintonesque response."
An Ascend acquisition would also be a departure from what Ken Fehrnstrom, vice president for strategic business development for Ascend, said in an interview late last month. He reiterated Ascend's desire to remain independent and compared the company to a "small dog that doesn't know it's a small dog. It will go after the big dogs." He also joked, "Maybe some day we could acquire Nortel," referring to Lucent's $36 billion Canadian rival Northern Telecom.
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