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

To: Edward J. Edwards, III who wrote (1560)	10/1/1998 8:23:00 PM
From: Duke	Read Replies (1) \| Respond to of 1629

TALKING POINT--Lucent seen making acquisition soon By Jessica Hall NEW YORK, Oct 1 (Reuters) - A favorite phrase used by executives at Lucent Technologies Inc. <LU.N> over the past two years has been "watch this space" for new developments. That space could be filled soon. As of Thursday, Lucent is now free from a two-year restriction against certain merger accounting techniques. And the telecommunications equipment giant is expected to quickly make a multibillion dollar acquisition to bolster its presence in the data networking market, analysts said. Lucent previously could not use so-called pooling-of-interest accounting in acquisitions without unraveling its favorable tax-free spin-off from AT&T Corp. <T.N> in 1996. Lucent's $3 billion initial public offering remains the largest in U.S. history. Lucent has made a series of small acquisitions but now that the accounting restriction, which applies to all spin-offs, has been lifted, the Murray Hill, N.J.-based company will have more freedom to pursue much larger acquisitions. "October 1 is the magic day. Everyone's on alert and everyone's talking about it," said one financial analyst who declined to be named. "I would suspect you'll see something sooner rather than later. Everyone wants to see something in the fiscal first quarter," said an industry consultant who works with Lucent, but declined to be named. Lucent's first quarter ends Dec. 31. While Lucent is expected to use its stock as its currency in any acquisition, the company also has more than $1 billion cash on hand and extensive borrowing opportunities if it needed to use both stock and cash in a deal, analysts said. Lucent is a leader in providing equipment to phone companies, but it remains behind Internet equipment suppliers such as Cisco Systems Inc. <CSCO.O> and 3Com Corp. <COMS.O> in the fast-growing data communications business, analysts said. Lucent is likely to make an acquisition to leap-frog into a stronger position in the data networking market instead of taking the time to develop expertise and products on its own. Analysts said the short-list of potential acquisition targets includes Ascend Communications Inc. <ASND.O>, an Alameda, Calif.-based maker of data communication switches and Internet access equipment; Santa Clara, Calif.-based 3Com, the No. 2 networking company; or Canada's Newbridge Networks Corp. <NNC.TO>, an expert in ATM packet switching. Other potential targets include Germany's Siemens AG's <SIEG.F> telecom unit, or even Finland's Nokia <NOKSa.HE> or Sweden's Ericsson <LMEb.ST>, some analysts said. "You can rule out Cisco or Nortel (Northern Telecom). But I wouldn't rule out 3Com or Ascend," said the industry consultant. "Also, don't lose site of the possibility of a smaller international company. The international channel would have even more dividend impact for shareholders," the industry consultant said. Lucent declined to comment on the recent industry speculation but the company has previously said it would be open to acquisitions that would expand its geographic reach and product portfolio. The company earlier this year also said it may seek an acquisition in the frame relay market. Frame relay is a high-speed method of transmitting data across wide areas. The most likely scenario has Lucent acquiring Ascend or 3Com, in addition to some smaller international companies, analysts said. One industry consultant cautioned that Lucent needs to wait until its stock recovers somewhat before it can make a major acquisition. Lucent's stock traded at 64-7/8, down 4-3/16, on Thursday, off about 40 percent from its 52-week high of 108-7/16 in July. Lucent's stock has been hurt by the general weakness in the stock market, concerns about slower growth throughout the telecommunications equipment market and earnings warnings from rivals such as Alcatel <ALA.N> and Nortel, which weighed on other stocks in the sector, analysts said. Despite the gloom hanging over the industry, Lucent remains upbeat. In recent weeks, Lucent has said it is comfortable with 1998 Wall Street earnings estimates, it remains optimistic about its growth prospect going forward and it continues to gain marketshare from rivals. But at its current stock price, Lucent may see its earnings dampened if it has to pay a high premium to acquire Ascend or 3com, which have market capitalizations of $9 billion and $10.7 billion respectively, one consultant said. Other analysts, however, expect Lucent to move quickly to avoid losing an opportunity to buy a prized target and push ahead in the networking market. "The industry and the competitive environment is heating up pretty fast. They would want to do something soon instead of losing an opportunity," said Raj Srikanth, a telecommunications equipment analyst with FAC Equities. 19:47 10-01-98 Copyright 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.