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

To: Diamond Jim who wrote (58752)	1/12/1999 5:45:00 AM
From: Glenn McDougall	Respond to of 61433

Lucent poised to buy Ascend, newspaper says Newbridge, Nortel would feel fallout if $16-billion U.S. deal is done James Bagnall The Ottawa Citizen If telecommunications equipment giant Lucent Technologies Inc. of Murray Hill, New Jersey, actually winds up buying Ascend Communications Ltd. of Alameda, California, this week, the move will have a profound impact on Canada's communications networking industry. The long-rumoured merger of the two U.S. heavyweights gained fresh currency yesterday when The Financial Times of London reported the deal could close as early as tomorrow. Lucent is a direct competitor of Brampton-based Northern Telecom Ltd. across a wide range of activity, with one notable exception -- it lacks a strong presence in the data communications market. Nortel paid $6.9 billion U.S. last fall to pick up data networking specialist Bay Networks Inc. of California. At the time, Nortel chief executive John Roth billed his purchase of Bay as the first major industry effort aimed at marrying the two worlds of voice and data communications. If the Lucent-Ascend deal pans out, Lucent will have answered the challenge. "Lucent has been the runaway winner in the overall telecommunications equipment market," says Tom Nolle, president of Cimi Corp. of Voorhees, New Jersey. "If it has a weakness, it's in the area of new-generation technologies. The Ascend deal would fill that hole." Ascend competes head on against Kanata-based Newbridge Networks Corp. Both develop high-speed data switches that use a technology known as asynchronous transfer mode (ATM) and generate roughly the same level of annual revenues. The two firms have long been considered possible takeover candidates for Lucent. Assuming Lucent does close its rumoured $16-billion U.S. deal with Ascend, Newbridge obviously loses the opportunity to become part of one of the industry's premier corporations. On the other hand, says Paul Silverstein, an analyst with BancBoston Robertson Stephens, a New York-based securities firm, Newbridge shares could soon acquire a healthy acquisition premium. "It's conceivable there will be a bidding war for Newbridge," says Mr. Silverstein. "There are only two ATM players left at a certain level -- Ascend and Newbridge. "So if Ascend gets snapped up, Newbridge becomes a logical target for companies like Alcatel, Ericsson or Siemens." Mr. Silverstein said he doesn't think Newbridge will sell out soon. The company has been winning plenty of new business and is expected next month to report solid third-quarter numbers. This kind of performance on its own would tend to boost the value of Newbridge stock. Company founder Terence Matthews also exercises considerable control of Newbridge through his 23- per-cent stake in the firm. However, assuming the takeover premium does emerge, Mr. Matthews's previous reluctance to consider a sale might vanish. "Terry isn't going to be a road block," Mr. Silverstein said. "Everybody has a price." Investors offered an interesting take on yesterday's report. Shares at Ascend, not surprisingly, jumped $5 1Ú4 to $76 11Ú16 on the Nasdaq exchange; Lucent shares fell $2 5Ú16 to $112 15Ú16 on the New York Stock Exchange. Newbridge shares closed up 70 cents on the Toronto Stock Exchange at $49.75; Nortel stopped trading at $82.15, down $2.10. Despite Lucent's decline, its market value was a towering $148.7 billion U.S., compared with $36.2 billion U.S. for Nortel. Ascend finished the day with a market value of $16.6 billion U.S., well ahead of the $5.9 billion U.S. value accorded Newbridge. If Newbridge does soon pick up an acquisition premium, there'll be lots of room to make up. ------ Previous