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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Gene W who wrote (464)	3/3/1999 1:04:00 AM
From: Steve Fancy	Respond to of 3891

FOCUS-France's Alcatel snaps up network morsel Xylan Reuters, Tuesday, March 02, 1999 at 21:54 (Adds comments, details, prv PARIS) By Scott Hillis LOS ANGELES, March 2 (Reuters) - French telecommunications giant Alcatel (SBF:CGEP) said on Tuesday it was buying California Internet equipment maker Xylan Corp. (NASDAQ:XYLN) for $2 billion to grab a slice of the lucrative data network market. The latest target in a string of network-phone mergers, Calabasas, Calif.-based Xylan may have been the last juicy morsel left for telephone firms looking to dig into the booming data market, analysts said. Xylan, founded in 1993, makes switches, chips and software capable of zooming data between computers at high speeds, and helped lead an assault on sprawling but clunky voice networks run by telecoms giants. The value of data networks became clear last year when data traffic on the information highway overtook voice traffic. Companies such as Xylan have seen sales soar as companies rush to get wired. Alcatel said it would make a cash offer of $37 a share for all outstanding Xylan stock, with the tender opening on March 8. That is a hefty premium of about 37 percent over Xylan's closing price on Monday of $26.94. Xylan stock jumped $8.81 to $35.75 on Nasdaq on Tuesday after the deal was announced. "Alcatel has devised and is implementing a comprehensive strategy to become a key worldwide player in the Internet field," Alcatel Chairman Serge Tchuruk said in the statement. Alcatel said completion of its deal was subject to 90 percent of the shares being tendered and regulatory approval. Following the path recently trod by the likes of Canada's Northern Telecoms (TSE:NTL), which merged with Bay Networks, Alcatel is the latest phone company to try to cash in on the Internet boom by buying a network company. "The natural reaction was for those guys to go out and acquire data networking companies," said one analyst close to the deal who asked not to be identified. "There is a natural convergence between the two players." Alcatel's acquisition could leave slim pickings left on the table for other telecommunications companies looking for the perfect Internet partner, analysts said. That is because leftover network companies are either too big, as in the case of Cisco Systems (NASDAQ:CSCO), to be a realistic takeover target. Others are too small to satisfy the appetite of the telecoms giants. "Xylan, in my view, was the best in terms of technology," the analyst said. "We are getting to the end (of the mergers trend), which explains some of the premium that was paid," the analyst said. "They were paying for the best data company left." Alcatel has been a key Xylan customer and accounts for a significant portion of the U.S. firm's business. Xylan has some 4,000 customers and revenues of around $348 million, putting Alcatel's bid price at 5.7 times its sales. Sales were expected to hit $450 million this year and to top $1 billion in 2000. Alcatel said Xylan would continue to sell through its existing distribution channels and would become its center of competence for all data networking projects. Copyright 1999, Reuters News Service