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

To: Mighty Mizzou who wrote (60135)	2/24/1999 11:43:00 AM
From: H.A.M.	Respond to of 61433

Ascend's Rise Through Buys Gets It Bought INVESTOR'S BUSINESS DAILY Wednesday, February 24, 1999 By Michele Hostetler First it was Ascend Communications Inc. that was doing all the acquiring. Now it's the one being acquired. Ascend has made a number of purchases in recent years, including its $3.7 billion buy of Cascade Communications Corp. in June 1997. But the tables have turned. Lucent Technologies Inc. has announced it wants to buy Ascend for $20 billion. The deal is expected to close by June. Cascade's technology is one reason why Lucent wants to buy Ascend, which specializes in networking gear for carriers. Ken Fehrnstrom, Ascend's vice president of business development, recently discussed with Investor's Business Daily how to make an acquisition work. IBD: How has Ascend's penchant for buying companies helped in the Lucent acquisition? Fehrnstrom: Prior to Lucent acquiring us, we did not intend on being acquired. We had some very bold acquisition plans. We were going to be acquiring companies that had revenue streams of $1 billion-plus and caps of greater than $7 billion to $10 billion. This is the first time I've been on this side of the table. I think it helps because I know what would cause integration problems. I've been able to work with the Ascend acquisition team, and when they've started to put up resistance in a certain area, I've been able to put things back into perspective for them. IBD: What are some examples? Fehrnstrom: Sometimes they're very silly things (like) the name of the company. Some people were very concerned because they didn't want to lose the name Ascend. We have a lot of plaques and coffee mugs with Ascend on it. People wanted me to stress that we would be a subsidiary of Lucent. No, that doesn't play in Lucent's strategy. We are now a part of Lucent. IBD: What are some of the key attributes of a successful acquisition? Fehrnstrom: The first one is: Does it fit with the short-term and medium-term strategy of the company? Too many acquisitions get caught up in the emotions of the people leading the effort. Then you want to be concerned with how you will organize the acquisition. Is it an acquisition where the synergy is associated with growth, but cost savings as well? If so, you have to belly up to the bar . . . and tell the target company, ''We're going to shut down your financial operations because (they're) redundant.'' IBD: What's an example of where you've done that? Fehrnstrom: With the Stratus acquisition (telecommunications gear maker Stratus Computer Inc. in August for $822 million), we knew right off we just wanted to acquire the telecom operations and we were going to sell off the rest of Stratus. We made that very clear to Stratus. Then there's a lot made of ''East Coast-West Coast'' differences. I think that's all hooey. Most companies are going to have to run a geographically dispersed company. Another thing a lot of people make too much of are cultural issues. They can't be wildly opposed. But as long as they have a similar objective . . . the cultures can be different. IBD: The Cascade acquisition generated a lot of criticism, some of it over a large number of employees leaving. What do you think of it now? Fehrnstrom: I can't say the Cascade acquisition was a stroke of genius because it was obvious it was something that would be very beneficial to Ascend. The thing that was fortunate for us was that Cascade fell upon some hard times. They went from $100 a share to almost $30 a share. As far as the talent leaving Cascade . . . when we went back and did an analysis, we found out that a lot of the people who left were starting to leave before the acquisition. IBD: How do you keep acquisitions organized? Fehrnstrom: If I get to the point where I have yellow sticky notes or pink ''somebody called'' notes, I am in trouble. Before I leave to go home, I will actually stay to organize everything. I know exactly what action items need to take place, what priority they have and who's doing what. IBD: How do you keep them all focused? Fehrnstrom: No. 1, you have to be focused. You cannot waver. You cannot hedge. The other thing is, you have to do by example. You have to be ahead of everybody else. You're working twice as much as them. The minute the leader gets behind, the whole team starts to crumble.