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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: David Lawrence who wrote (21657)	9/20/1998 2:04:00 PM
From: Mang Cheng	Respond to of 45548

"You Can Bet Lucent Will Play The Acquisition Odds" Salvatore Salamone I love listening to sports talk radio. That's been especially true during the past month as Mark McGwire and Sammy Sosa battled it out and ultimately broke Roger Maris' single-season home-run record. Although most of the discussions focused on hard statistics, the most annoying callers spent hours droning on about what they'd do if they caught the record-setting ball. And how they'd spend the money after they sold it. What hopeless dreamers: 99.999 percent of them would never find themselves in the same city-never mind the same ballpark-with these players as historic events unfolded. Well, in some ways I feel as hapless as these folks. I have spent the past few months arguing a hypothetical situation that I have about as much chance of participating in as these baseball fanatics. My obsessive conversations have all focused on one question: What company would I buy if I were Lucent? Oct. 1 is the day Lucent will be freed from some constraints imposed when it split off from AT&T on Oct. 1, 1996. Basically, Lucent will be able to pool its resources, thus having a much larger pot of money and stock to offer an acquisition candidate. To me, this freeing up of resources is like those fans who expected to have a few million bucks in their pockets after selling the baseball they were going to catch. I could just imagine myself being Lucent's acquisition guy sitting there on Oct. 1 and telling the world I have purchased this company or that for Lucent. There are just so many choices-all of which make sense if you focus on particular holes in Lucent's offerings. It's too bad networking isn't more like sports. I can just see the Las Vegas bookies handicapping this megamerger right now. They'd probably make 3Com the favorite, with 1-1 odds. Lucent has done an incredible job during the past two years of transforming itself from a telco equipment company into a data networking giant. The trouble is, its reach is still mostly limited to the carrier and service provider community. Yes, Lucent sells enterprise products today. But it is still considered second tier in this segment of the market. Acquiring 3Com would expand its enterprise portfolio enormously, letting Lucent supply an end-to-end solution that goes from the carrier backbone to deep within the corporate network. And who knows-maybe some Lucent exec just wants to tell the kids he or she now owns the PalmPilot product line. Now that's cachet. Coming in next would be Cabletron, with 3-1 odds. Cabletron would help get Lucent into the wiring closet, where it needs to be in order to effectively compete with the Ciscos of the world. Some view Cabletron as being very attractive, with a stock perceived as undervalued. Others think there is too much of a cultural disconnect between the brash Cabletron and the staid Lucent. The bookies likely would put Ascend Communications right up there, too. I give Ascend 4-1 odds on the big board at Caesar's Palace. But some would argue that acquiring Ascend would duplicate much of the technology that Lucent already has for integrating voice and data networks. My dark-horse favorite would be Sun Microsystems. This choice is the most interesting to me, mostly because many of my colleagues and friends tell me it's ridiculous, and that I'm nuts for even thinking about it. They argue that Lucent doesn't want to be in the server business and that only about 20 percent of Sun's revenue comes from dealings with telecommunications companies. I think this is narrow-minded thinking. Many networking hardware companies claim to have all the equipment a service provider needs to set up a point of presence (POP). But in reality, these companies are focusing only on the access equipment. A Sun/Lucent merger would let Lucent offer a real POP in a box, complete with Web servers and all the equipment required to connect users to the site. Unfortunately, like most discussions about hypothetical megamergers, the debate leading to the actual event is always more fun than what actually happens. After all the talk-radio chatter, the stadium employee did the right thing by giving McGwire the 62nd- home-run ball. Lucent, for its part, might think it is doing just fine and opt not to make the megapurchase I've been predicting. techweb.com Mang I guess we'll just have to wait until October to see what will happen with Lucent and the single-season home-run record. Salvatore Salamone is an editor at large at InternetWeek.