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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (51151)	8/1/1998 9:14:00 AM
From: Kent Rattey	Respond to of 61433

AS HAS BEEN rumored all week - and reported in the San Jose Mercury News on Friday - Ascend may announce Monday a deal to buy Stratus Computer, a maker of fault-tolerant computers. ÿ ÿ ÿ ÿMy sources tell me the same, but the companies are not returning calls. Ascend is expected to use its stock in any acquisition. And given that Stratus does have $11 a share in cash, a deal even above the current price would not be expected to bring dilution. ÿ ÿ ÿ ÿBut clearly shareholders of Ascend are not happy about the prospect of a Stratus deal. And analysts are also joining in that anti-Stratus sentiment. ÿ ÿ ÿ ÿAt Warburg Dillon Reade, analyst Nikos Theosodopolous told clients Friday morning that such an acquisition would not make sense for Ascend. While Stratus does sell its continuous availability hardware and software to the same telephone providers that Ascend sells its products to, Theosodopolous says they account for about 50 percent of revenues at Stratus and do not represent a strategic fit for Ascend. ÿ ÿ ÿ ÿAnd analysts point out that while its market value is less than a tenth that of Ascend, Stratus has 2,500 employees versus 2,300 at Ascend. ÿ ÿ ÿ ÿWhy, then, would Ascend want to make an acquisition that brings with it such overhead? ÿ ÿ ÿ ÿCIBC Oppenheimer also does not believe an acquisition by Ascend of Stratus makes sense despite the overlap in customers, and the firm told its clients that Friday as well. But perhaps these analysts are missing one point. ÿ ÿ ÿ ÿAscend has long been rumored to be in the target sites of giant telecom equipment provider Lucent. But as I have pointed out many times, Lucent would not be able to buy Ascend and receive favorable accounting treatment until October of this year. That means closing the deal by October - so if Lucent announced a deal now, it might well qualify for that preferred treatment were it to take three months to close. ÿ ÿ ÿ ÿSo, say you're Ascend and you think Lucent may soon come courting, and you aren't interested in being courted. Perhaps you go and buy a business that makes your company less attractive to a potential acquirer - even though Wall Street doesn't think it makes a great fit. ÿ ÿ ÿ ÿWho knows? Perhaps we will on Monday.