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

To: William Hunt who wrote (2632)	5/13/1998 12:41:00 PM
From: Kevin	Read Replies (1) \| Respond to of 21876

Street.com comment LU & ASND. If LU buy ASND for $50.00, how LU stock will be affected? I mean how much LU may go down? I am LU share holder, may writing some covered call. Any comment will be appreciate. By Kevin Petrie Staff Reporter 5/13/98 10:58 AM ET In a merger-manic environment, Wall Street is betting that Lucent (LU:NYSE) and Ascend (ASND:Nasdaq) would make an ideal couple. The thinking is that Ascend would help Lucent in its pursuit of the high-octane data networking market. Lucent mainly serves the slow-growth phone market. Ascend, which has rebounded after a product glitch last year, would bring both technology and corporate customers to the table. In cases, it also has elbowed out the dominant networker, Cisco (CSCO:Nasdaq), in supplying phone carriers with large boxes that channel data through the heart of their networks. To be sure, the stock market is brimming with takeover speculation, much of which never will occur. Even the computer networking segment has seen its share of takeover chatter. After two trade publications reported over the past two weeks that Bay Networks (BAY:NYSE) was holding talks about being acquired, the networker confirmed to analysts that it rejected an offer from Northern Telecom (NT:NYSE), Bloomberg reported today. The news service said Bay was open to other offers. Investors already have bid up Ascend in anticipation of a deal, which could nip some of the potential premium. The stock has had at least $5 added to its price thanks to speculation that Lucent would pay in the low $50s per share, according to Paul O'Neil, portfolio manager with investment firm Knight Bain Seath & Holbrook. O'Neil wouldn't say whether he's invested in either stock, but says he's "active" in the group. On Tuesday Ascend ended down 1/4 at 44 13/16, and Lucent rose 1/16 to 73 1/16. With an $8.6 billion market capitalization, Ascend trades at 7 times trailing revenue, and Lucent is priced at $95 billion, or 3 times trailing revenue. The takeover speculation has priced Ascend at more than 8 times revenue. Ascend didn't return a call for comment. A Lucent spokesman declined comment on Ascend, but said Lucent intends to claim high-growth markets through internal research and development, alliances and acquisitions. "Ascend is a prime acquisition candidate, for Lucent especially," says analyst Mike Cristinziano, at Gerard Klauer Mattison, which hasn't participated in any recent Ascend or Lucent underwriting projects. Cristinziano considers this combination more compelling than other scenarios because Ascend excels with phone carriers -- the part of data networking that boasts high profit margins. It's a natural partner for Lucent, which has long supplied phone carriers with voice gear. Cristinziano upgraded Ascend to buy shortly after it bounced in January; he had downgraded Ascend on its way down in September. Ascend knows the value of mergers. A year ago it closed the purchase of Cascade, whose asynchronous transfer mode, or ATM, products now are winning large contracts with expanding carriers such as Qwest (QWST:Nasdaq). Experts say Cascade would add another weapon to the Lucent arsenal. And Lucent's towering stock lends it a rich currency for deal making -- even with a target as pricey as Ascend. O'Neil says 3Com (COMS:Nasdaq), Bay and Cabletron (CS:NYSE) each lack the financial clout to contemplate ambitious acquisitions. Unlike Cisco, Lucent has shown that it's willing to take big bites when acquiring. In December it snapped up Livingston Enterprises, a builder of remote-access boxes for Internet service providers, for about $650 million in stock. A month later Lucent shelled out shares worth around $200 million for Prominet, which makes complex switches for corporate networks. And just two weeks it disclosed plans to buy Yurie Systems (YURI:Nasdaq) for $1 billion cash. Future deals might be bigger. Lucent, a spinoff of AT&T (T:NYSE), turns two-years old as an autonomous company in October. At that time Lucent can enter pooling-of-interest transactions in which two companies merge by swapping stock and adding their balance sheets. A pooling allows a company to avoid booking goodwill, or the difference between the purchase price and book value, which saps earnings over time. So bigger acquisitions become more palatable. One thing seems certain: If a big acquisition pushes down Lucent's stock price, some investors will see it as a buying opportunity. "If Lucent were to buy Ascend, I hope it would kill Lucent's stock. I would buy a bunch of it," says money manager Daniel McKelvey, at Forte Capital, which already holds a long-term stake in Lucent. Forte doesn't own Ascend.