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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Riley who wrote (15131)	3/2/1999 12:41:00 PM
From: Neil H	Respond to of 90042

Any guesses on who the other "remote access company" will be???? FOOL PLATE SPECIAL An Investment Opinion by Alex Schay Xylan "Switches" to Alcatel After a run-up of around 40% in the last two weeks, data networking firm Xylan (Nasdaq:XYLN - news) gained $9 1/8 to $36 1/16 this morning on the heels of the announcement that it will be acquired by French telecommunications giant Alcatel SA (NYSE:ALA - news) for $37 a share. The $1.9 billion deal comes in at 5 times Xylan's trailing sales, roughly 48 times trailing earnings (35 times forward numbers), and around 34 times trailing cash flow. The deal is hardly a surprise considering Alcatel's oft stated desire to fill in all the gaps in its product portfolio (DSC and Packet Engines). IN FACT, THIS MORNING Alcatel Chairman and CEO Serge Tchuruk announced that A DEAL TO ACQUIRE A REMOTE ACCESS EQUIPMENT PROVIDER IS ALSO IN THE WORKS and will be formally announced in the next couple of days. Alcatel owns roughly 6.5% of Xylan already, and the two companies have engaged in numerous joint technology agreements over the last four years -- with Xylan raking in about 12% of its 1998 revenues from Alcatel (Xylan had a 20% revenue target in 1999 for Alcatel and IBM (NYSE:IBM - news) combined). Considering that Xylan is currently working with over 100 carrier customers around the world, it's a natural fit for the firm to become the enterprise data networking hub for Alcatel. Evidence of the strategic necessity of incorporating "data solutions" into telecommunications' portfolios has already been amply documented over the last two years with Northern Telecom (NYSE:NT - news) purchasing Bay Networks and Lucent (NYSE:LU - news) recently acquiring Ascend Communications. However, Cisco's (Nasdaq:CSCO - news) presence in the game really makes the race -- at least for the moment -- a question of who will come in fourth place. With the European market growing off of a much smaller voice and data base, there is enough room for the major European players -- Alcatel, Ericsson (Nasdaq:ERICY - news) and Siemens AG (OTC BB:SMAWY) -- to garner a nice share of the pie. However, with Xylan rolling out some interesting products this year -- the OmniStack402G and OmniStack branch switches, plus the OmniCore ATM and gigabit backbone switch -- it looks like a newly reorganized Alcatel might pull ahead going into the first turn. Regards Neil