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

To: djane who wrote (51549)	8/4/1998 3:09:00 PM
From: djane	Respond to of 61433

SJ Mercury. Ascend confirms Stratus purchase mercurycenter.com Published Tuesday, August 4, 1998, in the San Jose Mercury News $822 million deal: The aim is to be major player in convergence; some operations will be shed. BY DAVID L. WILSON Mercury News Staff Writer Ascend Communications Inc., one of the nation's largest makers of computer networking equipment, confirmed Monday that it will buy Stratus Computer Inc. for $822 million in stock, a move designed to deliver voice, data, and even video over a single wire. Ascend, which is based in Alameda, will pay three-fourth of an Ascend share for each Stratus share, valuing the Marlboro, Mass.-based company's shares at $33.35, 15 percent more than Friday's close. Ascend closed Monday up $2.34 at $46.81; Stratus closed up $4.88 at $33.75. Some analysts argued that the deal would make Ascend less attractive to a company like Lucent Technologies Inc., which primarily makes telephone switching equipment but is eyeing computer networking companies to ride the convergence wave, delivering telephone service, computer networking and even video over a single wire. Such a purchase was outlined Thursday in the Mercury News. Ascend executives said they intend to dispose quickly of the items made by Stratus that don't directly help Ascend be a major player in the convergence revolution. ''The transaction opens up a $10 billion new market opportunity for Ascend's products now served almost exclusively by traditional telecom-equipment suppliers,'' said Ascend Chief Executive Mory Ejabat. Stratus products can be divided into four broad categories: telecommunications, enterprise computing and two sets of financial software. Stratus only will keep a single division, the telecommunications technology, and get rid of the the other three. ''Those other three business units will be divested by the end of 1998,'' said Jeanette Symons, Ascend's chief technology officer. Stratus is among a handful of companies that make the sophisticated equipment, known as gateways, used to transfer data traffic between the Internet and the public switched telephone network, or PSTN. They also make ultra reliable computers that the telephone companies use to help direct traffic on and add services to their networks. Stratus, though, is struggling with weak demand in Asia. Last month it said it will cut 350 jobs, or 15 percent of its workforce, as it reported a second-quarter loss and a 20 percent drop in sales. And some analysts argue that the convergence phenomenon has been overhyped. Craig Johnson, a principal at PITA Group in Portland, says the telephone companies have been slow to plug in data networking equipment for fear of making their networks less dependable. ''The biggest issue people worry about is reliability,'' he said. Other analysts suggested Ascend's strategy was sound. ''This will complement Ascend,'' said Aman Kapoor, director of switching and routing at Ryan Hankin and Kent. Ascend executives said the Stratus technology will give the company an edge in competing against networking giants like Cisco Systems Inc. ''We can build pipes that are huge. The real key is making them manageable,'' said Symons.