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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: John Chen who wrote (10544)	10/22/1999 1:26:00 PM
From: Robohogs	Read Replies (1) \| Respond to of 21876

Sycamore just opened with a $21 billion valuation, more than the price of ASND being sold to LU. Are we in lala land or what? This means it was 1/7 the value of LU on its first trade.

To: John Chen who wrote (10544)	10/22/1999 1:38:00 PM
From: Maverick	Respond to of 21876

LU resell Premisys' VOATM technology to CLECs and other carriers, SBC, WCG Why did Ascend's founders invade Premisys? By Julie Landry Redherring.com October 22, 1999 Why Premisys (Nasdaq: PRMS)? With the communication company's stock tanking over the past year and the voice market struggling, investors had to be a little confused when the newly formed Zhone Technologies announced Thursday morning that it would acquire Premisys in an equity-for-stock deal worth about $240 million. Despite the head-scratching on investor message boards, Premisys's shares jumped on the news, closing Thursday at $9.59, up 72 cents from Wednesday's close. Zhone is barely a month old, but the company is no newbie in the networking market. Cofounders Mory Ejabat, CEO; Jeannette Symons, chief financial officer; and Bob Dahl, chief technology officer, were the forces behind Ascend Communications, a successful networking company that they sold to Lucent Technologies (NYSE: LU) in January for a cool $19 billion. None of the former Ascenders would comment on the acquisition, but snatching up the struggling Premisys may have been the smartest thing Mr. Ejabat and crew could do. HANGING ON THE TELEPHONE Founded in 1990, Premisys's voice and asynchronous transfer mode (ATM) integration products have been competing in a "highly unglamorous" market for the past few years, says analyst Tom Nolle, president of technology consultancy CIMI. ATM-based products have taken a backseat to touted voice-over-IP technologies. He believes that Zhone's acquisition of Premisys means Zhone will move into the market for ATM products that sit between carrier service providers' central offices and their end users. "In the near term, it's possible that if Zhone is going after the ATM outside-plant market, that market could be bigger than the market Ascend played in," says Mr. Nolle. He estimates that the opportunity for voice-over-ATM providers could reach $50 billion per year, but only if all regional carriers opted to carry voice traffic via ATM technology.However, he cautions that the "odds are slim" that even 10 percent of the market will adopt voice-over-ATM next year. One key indicator of adoption of voice-over-ATM may come from SBC Communications (NYSE: SBC). The telecommunications giant this week said it would spend $6 billion to upgrade its network and those of the Williams Communications Group (NYSE: WCG). If SBC spends a big chunk of the money on voice-over-ATM, competing telecoms may follow suit. ATM technologies could also find a home among the growing number of competitive local exchange carriers (CLECs), according to market researcher IDC. "ATM is intrinsically cheaper to deploy than circuit-switched technology, and its inherent support for quality of service makes it more suitable than frame [relay networks] and IP for delay-sensitive traffic, such as voice," notes analyst Ladan Meschian. ONE WAY OR ANOTHER Zhone is offering $10 per share for all outstanding Premisys common shares. However, Zhone has not yet explained where it will come up with the funds to finance the acquisition. Zhone was expected to announce a $500 million round of funding Thursday from Kohlberg Kravis Roberts (KKR), the Texas Pacific Group (TPG), and New Enterprise Associates. Although the announcement never happened, funding discussions are pending, a source close to Zhone says. The involvement of the two leveraged-buyout firms, KKR and TPG, raises the possibility that the deal could be partially financed by debt. Zhone placed a higher value on Premisys than do its own shareholders, who have knocked Premisys's share price from a 52-week high of $16 to its current valuation. Holdups in the deployment of Premisys's major server product dragged the company's fiscal 1999 revenues down 10 percent to $92.4 million from the prior year. That was the company's first down year since 1995. But Premisys made a comeback in its second fiscal quarter, ended September 30: sales rose 42 percent to $21.7 million over the first quarter. It has maintained profitability for the past five years, but net income has declined annually since it peaked at $16.8 million in fiscal 1996. Its 1999 profits were less than half that amount. It's puzzling why Premisys hasn't performed better, considering that its two main "competitors" -- Lucent and Nortel Networks (NYSE: NT) -- are also major customers. Lucent and Nortel last year both agreed to resell Premisys technology to CLECs and other carriers. Because of Premisys's long-standing relationships with Lucent and Nortel, Zhone is not expected to compete with either of the two giants. Mr. Ejabat's non-compete agreement with Lucent, signed as a condition of its purchase of Ascend, also indicates that Zhone has something different up its sleeve.