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

To: djane who wrote (51858)	8/10/1998 2:18:00 AM
From: djane	Respond to of 61433

Ascend's Stratus Strategy -- It's a gamble, but by acquiring Stratus, Ascend is positioning itself as a one-stop shop for telecom companies August 10, 1998, Issue: 695, Section: Behind The News techweb.com William Schaff Finally, one of the worst kept secrets on Wall Street has been revealed: Ascend Communications Inc. (ASND-Nasdaq) is acquiring Stratus Computer Inc. (SRA-NYSE). Some analysts were aware of the negotiations for some time and couldn't believe Ascend actually wanted Stratus. Personally, I see a lot of merit in the deal, but I do have some concerns. First things first: Why is Ascend interested in Stratus? Ascend is a dominant player among Internet access concentrator vendors and has a strong position in the fast-growing market for data network switching equipment, including asynchronous transfer mode and frame relay hardware. Only 30% of Stratus' revenue comes from selling voice network switching equipment and network operating systems software to telecommunications companies, but that's what attracted Ascend. By adding Stratus' voice network hardware and software to its own data network products, Ascend is positioning itself as a one-stop shop for telecom companies as voice and data networks converge (the two companies already have a lot of clients in common, such as NEC). Ascend plans to sell off all of Stratus' nontelecom products and services by the end of the year. Because these account for about 70% of its revenue-estimated to be $550 million to $600 million in 1998-the sale could generate a considerable amount of cash. Assuming the sales go as planned and Ascend achieves 1999 revenue close to the $2 billion on a standalone basis that's expected, Stratus' telecom revenue will amount to 15% of the merged company's revenue next year. But there are risks. One is that merger activity among telephone companies may continue to delay some orders for Stratus products. Another is that almost 60% of Stratus' 1997 telecom sales were through NEC, which is heavily affected by the economic crisis in Asia. Stratus' sales to NEC fell 26% in the second quarter, year over year, and are expected to decline further in the third quarter. In the long run, the NEC relationship is sound and profitable; but right now, it's a concern. A third issue is how quickly Ascend will be able to sell off Stratus' nontelecom divisions: IS managers won't buy Stratus' enterprise server hardware if they don't know who will support the products later. Ascend will take a one-time charge of $300 million to $350 million for the merger, plus $80 million to $100 million to cover other costs related to the transaction, including about $20 million for a previously announced 15% cut in employees at Stratus. The merger should boost Ascend's 1999 earnings by about 5 cents per share. Before the merger, Wall Street's earnings estimate for Ascend was $1.60 per share with growth pegged at 25%. Stratus was expected to earn $1.81 per share with growth projected at 12%. I believe Ascend CEO Mory Ejabat got valuable assets on the cheap. Stratus has more than $265 million in cash and equivalents on its balance sheet, and no debt. Because the total value of the acquisition is about $800 million, Ascend is buying Stratus for $535 million. That's a veritable steal for a company with 1997 sales of $688 million and positive cash flow and earnings. And if Ejabat gets a reasonable price for Stratus' nontelecom products and service, Ascend may end up with a fantastic deal. But there's a catch. Stratus' operating margin of 18.9% is well below Ascend's 30.8%, which means the merger could bring down Ascend's margins. It's hard to know just how far they might decline because Stratus doesn't provide a clean financial breakdown of its telecom-related business. And Ascend's return on net assets has also been anywhere from two to four times higher than Stratus', which means Ascend's growth rate is likely to decline after the merger. Purchasing Stratus will be a good deal for Ascend only if Ejabat can sell off Stratus' nontelecom assets quickly and maintain the higher growth rates and margins. William Schaff is chief investment officer at Bay Isle Financial Corp. in San Francisco, which manages the InformationWeek 100 Stock Index. You can reach him at bschaff@bayisle.com. Copyright r 1998 CMP Media Inc.

To: djane who wrote (51858)	8/10/1998 2:23:00 AM
From: djane	Respond to of 61433

Ascend to buy Stratus in stock swap techweb.com August 10, 1998, Issue: 802, Section: News Kimberly Caisse Boston -- Ascend Communications Inc. unveiled plans to buy Stratus Computer Inc. in a stock swap deal valued at $822 million. Ascend is hoping to gain access to the voice- and data-integration products Stratus sells to network service providers and carriers. The combination of Stratus' switches and operations systems software will allow Ascend to instantly sell products that integrate voice and data networks, Ascend officials said. The Alameda, Calif.-based company sells remote-access equipment, Frame Relay and ATM switches. Ascend said it plans to split Marlboro, Mass.-based Stratus into two units. One units, focusing on telecommunications, will be integrated closely with Ascend. The other unit, which will consist of Stratus' enterprise computer business and VOS and Continuum products, will be spun off as an "independent entity" by the end of the year. In a memo sent to employees, Stratus President and Chief Executive Bruce Sachs said Ascend customers recently started telling the company it "needs the robustness of telecom switching gear in its switches, and it needs to provide linkage to the existing phone network, using SS7 and Intelligent Networking, for control and access to voice services with their data networks." MCI Communications Corp. was one of those customers, Sachs said in the memo. MCI "told Ascend that they need to 'go talk to Stratus' about an Internet gateway," Sachs wrote. When Ascend approached Stratus, officials focused on Stratus' hardware fault-tolerant platforms and Service Control Point (SCP) software, according to Sachs' memo. "Ascend identified the SCP as the 'brains' of the next-generation voice and data network," Sachs wrote. Ascend "also realized that, with Stratus' hardware technology, they could create significant competitive differentiation against Cisco [Systems Inc.], [Northern Telecom], and 3Com [Corp.]," Sachs wrote. Ascend decided to buy Stratus because it "was planning to sell this technology to those companies, too." Ascend wanted full control of the fault-tolerant SCP technology. Stratus' board of directors agreed to merge with Ascend so it could better focus on its two areas of expertise, Sachs wrote. "We are not capitalizing on the opportunities at hand in either the telecom market or the enterprise market. We don't have the pieces of our business locked and loaded together on a common set of targets, and so we are missing them," he wrote. When the deal is finalized in October, Sachs will become executive vice president and general manager of Ascend's Carrier Signaling and Management business. This unit will include sales, marketing and engineering areas of Stratus that currently are focused on its telecom business, Sachs wrote. Most of Status' employees will be included in the enterprise computer business, the memo said. How the manufacturing and service capabilities will be shared will be determined in the coming weeks, the memo said. One of the immediate affects on employees is the delay of the 15 percent workforce reduction, which the company announced last month, until after the deal is completed, Sachs said. Stratus had planned to lay off 350 workers worldwide in addition to 50 positions that were eliminated through voluntary attrition. For its second quarter ended June 28, Stratus reported a loss of $10 million, or 42 cents a share, compared with a net income of $17.4 million, or diluted earnings of 71 cents a share, posted in the year-ago quarter. Copyright r 1998 CMP Media Inc.

To: djane who wrote (51858)	8/10/1998 2:27:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

Stratus To Boost Ascend's Offerings techweb.com August 10, 1998, Issue: 727, Section: News & Analysis Salvatore Salamone Consolidation among data networking and telecom equipment companies just keeps rolling along. Ascend Communications Inc. last week said it is buying Stratus Computer Inc. in an all-stock deal worth about $822 million. Ascend officials said that Stratus' telecom networking expertise, particularly its Signaling System 7 (SS7) and advanced call-handling service products and applications, will help Ascend meet carrier and service provider demands for integrated voice/data services. The acquisition paves the way for Ascend to unite its IP and ATM data networking products with intelligent call-handling services that are common in the public switched telephone network. "The combination of Ascend with its gateway hardware and Stratus with its SS7 and [computer] services enable providers to offer an integrated voice solution," said Kevin Dundon, vice president of voice network development at IP-centric service provider Level 3. "That is positive for someone who is trying to build voice services without [central office] switches." Industry experts said the acquisition brings quite a bounty to Ascend. "Vendors have realized that voice-over-IP basic transport will be a commodity," said Christopher Nicoll, a senior analyst at Current Analysis Inc. "You will need things like number portability, 800 services and calling card services if you are going to offer a voice alternative over IP," he said. And that is where Stratus comes in. "Stratus does a lot more than SS7 gateways," said Lisa Allocca, an analyst at Renaissance Worldwide Inc. She noted that the company's service control point equipment, which combines special hardware and software, is used by telcos to offer intelligent networking services and applications like cellular roaming. Allocca said that all data service providers would like to offer such services, which are more commonly associated with the switched voice network. Stratus brings the applications to offer these services as well as the expertise in dealing with the worldwide telco market, according to Allocca. Copyright r 1998 CMP Media Inc.

To: djane who wrote (51858)	8/10/1998 2:30:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

Ascend to acquire Stratus Computer techweb.com August 10, 1998, Issue: 1020, Section: Business Alameda, Calif. - In the first deal linking a broadband switch company with a fault-tolerant computing specialist, Ascend Communications Inc. agreed last week to acquire Stratus Computer Inc. in an all-stock deal valued at $820 million. Ascend plans to continue the original plans by Stratus (Marlboro, Mass.) to sell off all non-telecom related business and eliminate 350 jobs. The primary driver for the deal, said Ascend chief executive Mory Ejabat, is a need to create platforms that support both circuit-switched voice and packet-switched data. Ascend's stock fell $7 a share July 31 after rumors of the deal were published in San Jose-area papers. But the stock recovered $1.06 to close at $45.50 per share on Aug. 3, after the deal was announced. Stratus stock rose $3.68 to $32.44 on the New York Stock Exchange. Stratus currently has four business units: telecom carriers; Operation Support System software and related OSS hardware; enterprise computing; and financial and enterprise software. Ascend will retain only the first two units, and will help Stratus find a buyer for the others. Of Stratus' $688 million in revenue for fiscal 1997, roughly half came from telecommunication accounts, the companies said. Copyright r 1998 CMP Media Inc.

To: djane who wrote (51858)	8/10/1998 2:34:00 AM
From: djane	Respond to of 61433

InternetWeek rumors. DELL to buy SRA hardware division; LU to buy CS? techweb.com August 10, 1998, Issue: 727, Section: Index The Dark Side Of Networking As I walked down the long hall from the warden's office, I was as antsy as Sun Microsystems, which is rumored to be an acquisition target for IBM because of its hold on Java. I had never spoken with a serial-port killer before, and I was about to speak with the king of them all-Dr. Hannibal Spectre, who had killed more serial ports than electricity. As if that wasn't bad enough, he did it slowly because he enjoyed it. Dr. Spectre sliced up serial ports the way Ascend reportedly is planning to slice up its recently acquired Stratus Computer subsidiary. Ascend may sell the Stratus hardware division to Dell Computer. I didn't want to talk to Spectre, but I had to. There was another dangerous serial-port killer on the loose, and I wanted to catch him before he killed again. I needed the insight that only Spectre could give me. "Maybe Spectre can even tell me if Lucent is really thinking about buying Cabletron," I said to myself. When I arrived at the maximum security wing of the prison, I thought about how many serial-port killers must be there. The place was a veritable serial concentrator, much like the SX family of concentrators that Specialix will be announcing this week. A guard took me through one steel door, then another, then another. Security here was tighter than the virus-protection software that stopped the recent "long file name" E-mail virus that was discovered last month. At least six vendors boasted about that one. Then, suddenly, I was face-to-face with the maniacal Dr. Spectre, who grinned at me through a wall of glass and metal that was as transparent as the move from Ethernet to Fast Ethernet via Allied Telesyn's new AT-8100 switch, which is scheduled to be released this week. "Hello, Case," he said, smirking. No one in the prison had told him who I was. But he knew, just as he knew that Symantec on Aug. 17 will announce a voice and fax messaging software solution for small businesses. "How did you know my name?" I asked. "I can smell your cologne," he grinned. "What is it, Eau de Ethernet?" "I need some information," I said, gritting my teeth. "I'll make you a deal. I'll answer your questions-you answer mine." "Why, that sounds lovely," he said. "My first question is what lurks in the hearts of men looking for consumer advocacy services on the Internet?" I started by telling him that C2B Technologies Inc., an Internet service that refers buying customers to major brand sites for purchases, is about to announce a licensing deal with the parent company of Consumers Digest. C2B will build a database exclusively for Consumers Digest, I said. "Now it's my turn," I continued. "How can I catch Son of RAM?" Spectre, still grinning, started talking. Help Case find the dangerous serial-port killer! Send him a news tip! E-mail it to ndetect@cmp.com or call 516-562-7809. If we use your tip, Case will mail you an InternetWeek coffee mug. Copyright r 1998 CMP Media Inc.