Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Mighty Mizzou who wrote (51425)	8/3/1998 1:56:00 PM
From: djane	Read Replies (1) \| Respond to of 61433

Very interesting tidbits from the Boston Globe on ASND/SRA [see middle] boston.com Stratus deal expected to be announced today Calif.-based Ascend seen buying Marlborough firm in deal estimated at $800m By Ronald Rosenberg, Globe Staff, 08/03/98 Ascend Communications Inc. is expected to announce this morning that it will buy Marlborough-based Stratus Computer Inc. in a stock deal estimated at $800 million, according to a person close to the negotiations. An exact price could not be learned last night, but the directors of both companies approved the deal over the weekend, the person said. The market value of Stratus's outstanding shares was nearly $807 million, based on its closing price of 28 7/8 Friday. The anticipated acquisition is just the latest in a flurry of deals as companies jockey for position in the rapidly consolidating telecommunications industry, the result of changes in regulations and technology that have thrown open the previously separate local, long-distance, and cable television markets. The buyouts have narrowed the number of service providers - including last week's agreement by Bell Atlantic Corp. to buy GTE Corp. for more than $50 billion - and equipment makers like Ascend. For Ascend, a fast-growing maker of data-switching gear based in Alameda, Calif., the takeover of Stratus would come nearly 15 months after it spent $3.7 billion to acquire Cascade Communications Inc. of Westford, one of Massachusetts's fastest growing telecom companies. Unlike the Cascade deal, which immediately expanded Ascend's product line and helped boost earnings, the pending purchase of Stratus is considered more controversial. Since rumors of the deal first surfaced early last week Ascend shares have dropped 14 percent, closing Friday at 4415/32. Analysts said it is not clear why Ascend would buy Stratus, a maker of fault-tolerant computers used mainly in the telephone, banking, and securities industries, rather than form a partnership to exploit the telecom technology Ascend covets. A person close to the negotiations said Ascend's interest in Stratus began this year when a consortium of companies was formed to improve the flow of phone traffic over the Internet. The group, led by Stratus, includes Ascend, 3Com Corp. and Bay Networks, both of Santa Clara, Calif., Cisco Systems Inc. of San Jose, and MCI Communications Inc. of Washington, D.C. Stratus, which sells its fault-tolerant computers to 27 of the world's 30 largest telephone companies, has developed computer technology that would divert telephone calls bound for the Internet from busy voice telephone switches. Voice networks are inefficient handlers of data calls; that's because data calls such as Internet connections tend to last much longer - 20 minutes to 1 hour or more - than typical voice calls. By using lower-priced computers - Stratus's computers - the goal of the consortium is to free up voice switches and use data switches with high-speed data computers to create a new Internet ''backbone.'' During those consoritum sessions, Ascend executives reportedly got to know the the Stratus team. ''Ascend got a close look at Stratus - inside and out,'' said the source. But Stratus, the last major independent computer maker in Massachusetts, has struggled financially. Last month Stratus said it lost $10 million in the the most recent quarter along with a 20 percent plunge in sales, due largely to a downturn in demand for its computer products in Asia. The combination prompted the 17-year-old company to cut 350 jobs - 15 percent of its work force - and take a $20 million charge against earnings. Recently, Stratus said it expects another 50 people to leave the company in the company months through attrition. Stratus will then employ about 2,000, half in Massachusetts. This story ran on page B04 of the Boston Globe on 08/03/98. c Copyright 1998 Globe Newspaper Company.

To: Mighty Mizzou who wrote (51425)	8/3/1998 1:59:00 PM
From: Wolverine	Read Replies (1) \| Respond to of 61433

Positive Spin from Motley Fool Lunchtime News: FOOL PLATE SPECIAL An Investment Opinion by Dale Wettlaufer Ascend Acquires Stratus Ascend Communications (Nasdaq: ASND) ticked down another $17/32 to $43 15/16 this morning after taking a shave of a more than $8 per share last week in the midst of rumors suggesting the company would acquire fault-tolerant computer systems and software company Stratus Computer (NYSE: SRA). Unlike all the other rumors that have involved Ascend over the last year, this was turned out to be true -- and it doesn't even involve Lucent (NYSE: LU) as a potential acquirer, either. In fact, Lucent will be even more squarely in Ascend's sights now. This morning Ascend announced that it has reached a definitive agreement to acquire Stratus by exchanging 0.75 of its shares of each Stratus share, valuing the Marlboro, Massachusetts-based company at $822 million. After considering excess cash and securities of approximately $150 million, the value of the transaction is substantially smaller than the sticker price, though. Ascend is interested in the company's telecom software and fault-tolerant hardware assets, not the enterprise server and software units. Those non-telecom units will be divested, according to Ascend, which may bring in some cash, but the important thing is to get rid of value-neutral or value-destroying businesses. Ascend thus believes the acquisition will be accretive to 1999 earnings, currently estimated at $1.50 per share according to I/B/E/S. With this acquisition, Ascend adds another product that Lucent would love to have -- a high-density remote access switch that can comb data from voice, offloading data onto a lower-cost Internet protocol network and unburdening switched voice networks. This is the reason why the talk of Lucent taking out Ascend last year wasn't totally off base, as switch congestion on Lucent's flagship Class 5 ESS switches is still an issue. Rather than deploying more and more of these switches, Baby Bells, competitive local exchange carriers, and even Internet service providers (ISPs) will be able to order a switching solution that can more cost effectively accommodate a mix of dial-up voice and data, T-1, T-3, ISDN, and other edge-of-network connections. Further, Ascend offers the full complement of backbone switching hardware and software. This deal means that Ascend can offer a wider complement of network components that carriers need, which should scare Lucent, Northern Telecom (NYSE: NT), and Cisco (Nasdaq: CSCO). That Ascend shares were down this morning is surprising. It's not giving away a huge chunk of its equity to do the deal, especially considering the excess cash and the planned divestitures. It will also have a wider product line that improves its strategic position in carrier-class switching. Finally, the company has the capital allocation sense to get rid of something that isn't going to add value. It appears as though Ascend is going to have to work to educate investors on what the transaction can mean to the company. With memories of the Cascade merger still fresh in some people's minds, the nonplussed reaction this morning maybe isn't so surprising. This deal looks like a win for the company for the long term and from the outset of the deal. Wolverine