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

To: gbh who wrote (54160)	9/14/1998 1:51:00 PM
From: KM	Read Replies (1) \| Respond to of 61433

Not to mention those bank mergers - CCI/TRV, NB/BOA.

To: gbh who wrote (54160)	9/14/1998 5:33:00 PM
From: gbh	Respond to of 61433

New competitor for ASND and CSCO on ATM front???? Top Stories: Update Tellabs Isn't Looking to Be Acquired By Kevin Petrie Staff Reporter 9/14/98 5:03 PM ET After TSC posted a story on his company's prospects, Tellabs (TLAB:Nasdaq) CEO Michael Birck returned a call and said Tellabs is not looking to be acquired. "I don't think that's very likely," Birck says. While heft is important among telecom suppliers, he doesn't think folding into a larger concern is necessary to survive. On the other hand, Birck will consider acquiring other companies, although no deals are on the table. In the meantime Tellabs has other priorities. One is to speed internal development of asynchronous transfer mode switches that would compete with products made by industry leader Cisco (CSCO:Nasdaq) and highflier Ascend (ASND:Nasdaq), Birck says. And he disagrees with investors who worry about the threat of optical technology. Tellabs' core products, he says, can augment optical systems, not just be supplanted by them. The following story was posted at 4:08 p.m. EDT. Back to the Drawing Board at Tellabs Desperately seeking a partner. That's Tellabs (TLAB:Nasdaq), which thought this summer it had found one but whose headaches in this deal-crazed sector may have just begun. Today the telecommunication-equipment supplier called off its merger with troubled Ciena (CIEN:Nasdaq), a builder of bandwidth-boosting products for optical fiber networks. The merger began unraveling after onetime highflier Ciena lost out on two contracts and made gloomy forecasts about earnings growth. This morning, Tellabs executives warned in a conference call that sales fell a bit short in the current quarter. Tellabs said slow bookings in August will keep third-quarter profits from exceeding second-quarter levels. However, the executives assured analysts that they were comfortable Tellabs could earn $2.35 per share in 1999, according to one money manager listening to the call. The Ciena merger would have allowed Lisle, Ill.-based Tellabs to broaden its product line in order to stake a position as the telecom industry moves from electronic phone networks to more advanced optical networks that carry lots of data. Now Tellabs faces difficult choices. "This isn't great news for Tellabs," says vice president Phillip Coburn with Lynch & Mayer, an institutional money manager. "The indications for the last two years is that that they needed to cross the chasm" and delve into new technologies, Coburn said. Now, Tellabs could either acquire a networker that provides remote access or asynchronous transfer mode network products, or it could be acquired by a bigger player. But "either of those strategies is not the one that Tellabs wanted to pursue," Coburn says. He declined to state his firm's position or history with the two stocks, but said he concluded this summer that it would be difficult for the merger to add to Tellabs' earnings next year. Another money manager said he sold Tellabs even as it was renegotiating the Ciena merger. At first the stock swap was valued at $7 billion, but after Ciena lost a possible AT&T (T:NYSE) contract, Tellabs and Ciena shares retreated and the firms renegotiated, cutting the deal's value to $4.9 billion. "As much as I like Tellabs and respect them, they just seemed too hungry to do the deal," says Craig Ellis, manager of Orbitex Info-Tech Fund. Tellabs' eagerness showed possible signs of weakness, Ellis mused. The paramount question: When will "digital cross-connects," Tellabs' core products, be supplanted by new generations of network products that carry signals in light rather than electronic digits? Tellabs' problems this quarter indicate the answer might be sooner rather than later. It might be easier to determine in the fourth quarter, which is often stronger that the third. "I'm going to be hesitant to go back into Tellabs at this point," says Ellis. One reason is that Tellabs might find it hard to find the right partner. Possible targets include Advanced Fibre Communications (AFCI:Nasdaq) which also sells to Baby Bells, but Ellis says its electronic-based products would do little to complement Tellabs' offerings. An Advanced Fibre spokeswoman could not be reached for comment. On the other hand, Tellabs could be acquired by Cisco (CSCO:Nasdaq) or Ascend (ASND:Nasdaq), which are major players. However, Ellis says these companies would benefit little from purchasing Tellabs' older telephone-based technology. Cisco declined to comment, and Ascend officials could not be reached to comment. A slightly more plausible scenario is Tellabs snapping up Fore Systems (FORE:Nasdaq), a builder of strong ATM boxes that could benefit from Tellabs' enviable client list of Baby Bells. For its part, Tellabs would get Internet-based architecture. Ellis says Fore is a digestible candidate, but he still finds a deal highly speculative. A Fore spokesman declined to comment. Ellis says Lucent (LU:NYSE), Northern Telecom (NT:NYSE) or Alcatel (ALA:NYSE ADR) are unlikely to purchase Tellabs in the near term. Those companies compete with Tellabs, so there is product overlap. Nortel declined to comment; Lucent and Alcatel could not be reached to comment. And for Tellabs the mating dance begins all over again.