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

To: Tim Luke who wrote (58691)	1/11/1999 2:17:00 PM
From: Kent Rattey	Respond to of 61433

Ascend Rises Amid Speculation of Takeover by Lucent (Update1) Ascend Rises Amid Speculation of Takeover by Lucent (Update1) (Adds details in 5th to 14th paragraphs; updates shares.) Alameda, California, Jan. 11 (Bloomberg) -- Shares of Ascend Communications Inc., the No. 4 network-equipment maker, rose as much as 7.8 percent amid speculation of a takeover by Lucent Technologies Inc., the world's largest phone-equipment maker. Ascend rose 5 1/4 to 76 11/16 in midafternoon trading of 12.1 million after earlier touching 77, its highest in almost two years. The Financial Times, citing unidentified people, reported that Lucent is in talks to buy Ascend for more than $16 billion and that an agreement could come as soon as Wednesday. Officials at the companies declined to comment. Speculation on Lucent's interest in Ascend has heated up as Lucent's share price has more than doubled in the past three months and the company sought approval to double its number of outstanding shares, making it easier to do a stock transaction. Adding Ascend would give Lucent the powerful computer switches it needs to compete with Cisco Systems Inc. in the market for Internet gear sold to phone companies. ''If Lucent buys Ascend, they'll be filling a key hole in their product line,'' said Craig Johnson, principal analyst with market researcher Pita Group in Portland, Oregon. Phone-equipment makers like Lucent are looking to sell more networking equipment to telecommunication providers, who are faced with mushrooming Internet traffic. The shares of Murray Hill, New Jersey-based Lucent fell 3 1/16 to 112 3/16. Lucent Acquisitions Since its spinoff from AT&T Corp. more than two years ago, Lucent has used its high-flying shares to buy companies that can give it new technology and inroads to new customers. Earlier today, Lucent agreed to buy closely held billing software maker Kenan Systems Corp. for $1.48 billion in stock. Lucent and Alameda, California-based Ascend have talked in the past, though the companies haven't been able to agree on a price, a person familiar with those earlier discussions said. Some analysts have speculated that Lucent won't make an all- stock acquisition that would dilute its earnings. For its fiscal year ending in September 1999, Lucent is expected to earn $2.11 a share, the average estimate of analysts polled by First Call. ''Lucent could do the deal in the high eighties,'' said Paul Johnson, an analyst with BancBoston Robertson Stephens, who rates Ascend ''buy.'' Ascend could be worth even more, though, because its sales and earnings are expected to grow rapidly, Johnson said. The company has developed a computer switch for routing large amounts of data on phone networks that Cisco won't be able to match until midyear, analysts have said. The switch, which uses technology known as asynchronous transfer mode, or ATM, is helping it win and retain business from phone companies. The ATM switches provided 40 percent of Ascend's revenue for its third quarter. ''This (a Lucent purchase of Ascend) could mean real competition for Cisco,'' Craig Johnson said. The challenge for Lucent will be trying to integrate the data-networking companies it has purchased, he said. Last May, Lucent bought Yurie Systems Inc., which also makes networking equipment, for $1 billion, and in October 1997, Lucent bought Livingston Technologies Inc. for $650 million in stock.