Judy,
Respectfully, I completely disagree. Carrier spending on networking/telecom equipment is 75% of the total market for such gear. Growth in the carrier sector is accelerating with the emergence of competitive carriers, while growth in the enterprise space is slower and decelerating. Margins in the carrier space are increasing as price has dropped to a secondary or tertiary consideration in every category in which ASND competes and switching costs make share gains by outsiders very difficult, while margins in the enterprise space are tightening in most categories as price competition heats up. There is very little real synergy between developing office equipment and developing carrier class gear, and the two markets feature completely different selling processes. Being dominant in the carrier space is not only sufficient to ensure long term viability, but is in fact the goal of Cisco, Lucent, NT, amongst others. ASND agreed to be bought by LU because a) the price was right, b) these guys are very competitive and being a part of LU gives them more guns, c) LU is a great company which can add alot to the ASND equation. I've run the numbers six ways to Sunday and am confident that the deal will be ~5% accretive in FY2000 and more so in future years. NB- it will be a penny dillutive for FY1999 by my calculations. Also, ASND's very different seasonality means the street will need to change expectations for FY2000 by shifting some earnings from Dec to the other quarters. |
